The Pain Doesn’t Stop At The Very Top
The Real Deal reports from New York. “One57, the alpha dog of the last residential boom, now has its tail firmly between its legs. ‘Escape from New York,’ an LLC that purchased a pad at Extell Development’s signature project for nearly $32 million in 2014, has gone into contract to sell the pad at what’s likely to be at least a $7 million loss, given that its last asking price was $25 million. One57 was once the ultimate symbol of the craze for high-end luxury apartments, and holds the record for the priciest closed sale in the city, at north of $100 million.”
“‘Escape from New York’ was just one of many investors that attempted to profit from appreciating prices. It purchased unit 62A, which spans nearly 4,500 square feet, for nearly $32 million, or north of $7,000 per square foot. It then tried to flip it soon after for $38.9 million, or more than $8,600 per foot. But, faced with declining demand for ultra-high-end homes and increased competition from new product, the seller slashed the price of the property several times. In May, the asking price was slashed to $25 million, or a shade over $5,500 a foot. It’s a far cry from the prices of previous years, and is yet another sign of the times.”
From Mansion Global. “Unit 62A’s trajectory is far from isolated. As the high-end condo craze in New York City eases and the market continues to cool off amid an oversupply of apartments and lower demand, other units in the same luxury tower overlooking Central Park—which briefly held the title of the tallest residential tower in the city—have recently sold at a loss. Apartment 64B changed hands in July for $21.5 million, a 23.5% discount from its original asking price. In December, unit 51C sold at $17.75 million and unit 44C at $17 million, 6.55% and 11.65% less than what they initially listed for, respectively, according to StreetEasy.”
“And some apartments are simply not moving. A three-bedroom unit at One57, 65A, sold for $29.3 million in 2014. It re-entered the market in October of 2015 at $35.5 million. After several cuts that have brought its current price to $29.5 million, it is still awaiting a buyer. Price reductions are not only happening at One57 but at other prime properties as well.”
“Prices for luxury residential real estate in Manhattan declined for the 10th consecutive month in July, marking ‘a point of oversaturation,’ said Krishna Rao, an economist at StreetEasy. Then there’s the full-floor condominium on 515 Park Avenue that is now selling at $10.5 million, a 27.5% discount from its asking price a year ago. The unit overtaking the 18th floor was listed in September of 2015 at $14.5 million.”
“Jonathan Miller of real estate appraisal and consultancy firm Miller Samuel Inc. said that Manhattan luxury sellers are coming to the realization that they need to price their properties according to the new market condition, which is weaker than a few years ago. ‘In a market segment where price trends are somewhere between flat and declining, an overpriced listing, by definition, will not sell,’ Mr. Miller said.”
From Bloomberg. “The pain doesn’t stop at the very top. According to new data from listings website StreetEasy, the luxury market still has some adjusting to do with price cuts now spreading from just the most expensive apartments to other price tiers. When looking at the second highest tier of the price bucket, or sales just below the top 20 percent of the market but above the bottom 60 percent, the slowdown is increasing at an even faster clip. ‘The luxury market was the first price segment where we began to see slowing price growth, and now we’re seeing other price segments following suit,’ Krishna Rao, StreetEasy’s economist added.”
“According to Rao, much of the slowdown can be attributed to a huge boom in supply as developers rushed to build luxury condos in 2014, as well as a stronger U.S. dollar that made it more expensive for foreign buyers to snatch up U.S. real estate.”
“‘It may be that economic and political uncertainty have discouraged domestic luxury buyers, while a strong dollar kept foreign buyers at bay and that they will both return to the market when their concerns are assuaged,’ Rao said. ‘But it may also be that prices and amenities in these luxury buildings have reached an unsustainable level and we are going to see some units languishing on the market and others quickly falling in price as they struggle to find buyers.’”
From Curbed New York. “Earlier this summer, a report by the New York Times suggested Brooklyn’s rental market was becoming over-saturated. Now, the latest round of market reports seems to back up that claim. According to Elliman’s report for the month of August, high inventory in Brooklyn has caused a declining median price and an increase in landlord concessions. Across the board, the New York rental market has more inventory than it does demand, according to Douglas Elliman’s numbers whiz Jonathan Miller.”
“Citi Habitats also tracked a high number of landlord concessions compared to last year. Per its report, 19 percent of rental transactions offered a free month’s rent and/or payment of the broker fee to entice new tenants in August. That percentage is unchanged from July, but it’s significantly higher than August 2015, when only 7 percent of leases offered a move-in incentive. Citi Habitats president Gary Malin says this about the rising incentives: ‘The simple fact is the rental market was overheated and due for a correction—nothing extreme, but enough to get landlords and would-be tenants back on the same page.’”
