Renters Fight For Better Deals In Manhattan

During good economic times, people tend to spend more freely without looking carefully at the true cost of things, and we certainly have seen some of that behavior during the past few years. But lately, we seem to be in a period when people are ready to conserve rather than overspend. Even the superrich have become careful in their spending because, to many of them, the future appears bleak – or at least uncertain. The tendency toward more frugal spending is reflected in the current Manhattan apartment rental market, with renters fighting for better deals on rent prices.

For landlords, the objective is to maximize rental income while for renters of course, the objective is to minimize the amount they must spend on rent. The introduction of new and sometimes less expensive apartments into the Manhattan rental market is tipping the balance in favor of renters, who suddenly have more options. In newly leased apartments, there are reports of landlords granting concessions in almost 10% of new deals. There has been a substantial increase in the number of apartments in Manhattan compared to just a year ago. With more apartment inventory on the market, renters can now take to their heels and look elsewhere when their existing landlords are increasing rents. These new apartments might even be better than the existing ones. In addition, some apartment seekers are taking refuge in Brooklyn where leasing has increased dramatically due to the presence of newly constructed high-end towers, which are more affordable compared to those in Manhattan. Manhattan landlords have been forced to take all of this into consideration - and as a result, they are generally reducing their prices.

One way landlords are striking better deals with tenants is through discount deals consisting of an average 2% reduction in rent – an increase from the 1.1% average reduction in the previous year. Instead of leaving for alternatives, with these discount deals, tenants are negotiating and staying in many cases.

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Trophy Homes Experience Market Fall In New York

There is a new trend in the once-frenzied real estate market for ultra-luxury homes. The end has come to ever-increasing price tags despite the skyscraping towers, luxury finishes and helicopter views. There is now often a huge difference between the price these trophy apartments are fetching and their initial asking price. The market has been flooded by a four- year construction boom targeted at buyers able to spend more than ten million dollars for a home. This is happening in the face of unstable global financial markets resulting in the pulling back of the rich investors, while the U.S. government is making an initiative to investigate cash-dominated transactions.

Many people have pointed to volatility in the financial markets as the reason for the pull-back in spending by the ultra-wealthy. While it may in part be true, other global factors are worth considering. Some of these include: the restriction by China on its capital outflow, Brexit, the impact of the reduction of oil prices, and increased tax rates in many countries. The effect of these combined factors is a dwindling volume of real estate sales, especially at highest levels. This has resulted in the delay of some projects, while other developers have resorted to drastic price reductions.

In one example, the initial asking price of a penthouse was 60 million dollars, but this was eventually sold for 42 million dollars after over 3 years on the market – a 29% reduction from the original price. In another example, a triplex penthouse which had been on the market for over a year at a price of 45 million dollars was eventually broken into two separate units. These two units are now being listed for 11.5 million and 28.5 million dollars respectively, giving a total value less than 40 million dollars. Similarly, the tallest of the new residential towers, located at 432 Park Avenue, once consisted of full-floor apartments priced up to 85 million dollars. These have been divided into two equal halves and each is now priced at about 40 million dollars. Meanwhile, there has been a postponement of any major marketing effort of a planned skyscraper at 111 W. 57th Street.

This high-end market meltdown is not limited to New York City. There has been a drop in property values in London, Singapore, Paris, Dubai and Moscow. All of these cities had been regarded in the past as stores of wealth for investors. In Manhattan however, in addition to the general trends affecting all of these global real estate markets, observers have identified some factors that are particular to the Midtown area. These include: oversupply, peak pricing and a lack of distinction between one glassy high-end unit and the next.

Excess supply can be a problem in any market. To the developers who built these ultra-luxury residences, it certainly looked like a good investment at the time. However, the situation has changed, and now even waiting for next year can be a risky proposition as no one can predict how the real estate market will be then.

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MANHATTAN: 2ND QUARTER 2016

Condos & CO-OPS Key Findings of the Second Quarter Report:

The second quarter of 2016 concluded with a record high overall average sales price and a hefty increase in the median sales price. However, other market indicators – i.e. rising inventory, a falling number of closed sales, longer days on the market and greater listing discounts – are demonstrating that the market may be entering a transitional phase.

Although there is robust buyer demand for properties under $3mil, weakness at the very top end, together with external market forces, are undermining confidence. While this quarterly examination of sales data displays strong year-over-year growth in certain sectors, the clear advantage held by sellers over the last few years appears to be dissipating in the face of rising supply and softening demand.

With 3,169 closed sales in the second quarter of 2016 (11% fewer than prior year), the overall average sales price was $2,116,000, a 17% increase over the prior year. The overall median sales price also had a significant year-over-year gain, posting a 15% increase to $1,140,000. In the examination of sales data by the three distinct price tiers – less than $3mil; $3mil to $10mil; and over $10 mil – rising average sales prices were evident only in the lowest price segment.

For all properties sold under $3mil, the average sales price was up 5% and the median sales price was higher by 7% with nearly 13% fewer sales. Units sold under $3mil accounted for approximately 85% of the total units sold this quarter. In the $3mil to $10mil price bracket, prices were essentially flat while closed sales fell 7%.

The top price tier segment, units sold over $10mil, market measures were weakest. With fewer record setting sale prices in the top 1% of the market, the average sales price for units sold over $10mil fell 19% while the median sales price was 15% lower than prior year.

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