Recent data culled from the
sales of top luxury residential properties in Manhattan pegs the average cost
of homes sold between the months of January and March 2016 at a little greater
than two million dollars ($2 million). This price is despite signs of a
slowdown currently under way in the housing market’s top strata. But prices of
high end real estate have jumped about 18.5%, which has happened despite a
supply glut of New York City luxury apartments. Some reasons for these trends
in the industry are postulated below.
One possible explanation for the increases is a
very large number of luxury sales that have been in the contract process during
the last 18 months, including some of the most expensive new buildings. Most of
these properties closed in the first quarter of 2016 thereby pushing average
prices to new heights. The increase was led by the condominium market whose
average price rose 33.9% compared to the former year to a whopping $2.9 million
average sale price.
This was in contrast to average prices in the
co-op market. The average price of apartments in the co-op market was said to
have fallen by about 12.3%. There were no newly developed buildings sold, so
most of the sales were resales. The reason for the low sales numbers in the
co-op market is due to the low amount of inventory on the market. The supply of
buildings in this market is said to be almost constantly at a ridiculously low
level, thus affecting sales. All of the action seems to be on the condo side of
the market these days.
A second reason for the drop in the sales of
co-ops has been attributed to the rising interest of developers, investors and
buyers alike in the condo market. Marketing and sales efforts seem to be mostly
directed at the condo market lately. Despite this, evidence tends to suggest an
evolving slowdown in the New York City luxury condo market. The supply of high
end condos in most major cities including New York, has been said to be in
excess, and so there has been a glut in supply with no proportionate increase
in demand.
Reasons for the lack of demand is in part due to
the recent global economic uncertainty which has slowed the growth of foreign
buyers, most notably those from Russia and China. The uncertainty of the U.S. presidential
election is also said to be one of the major reasons for the glut of high end
real estate, as some possible outcomes of the U.S. presidential election may
not be favorable to certain foreign buyers.
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