New York Luxury Apartment Market Loses Some Luster in 2016

Median apartment prices in Manhattan set a record in 2016, but by other measures it was a tough year for residential real estate.

Even as the median price of an apartment rose 9% this year, brokers said, the luxury market slumped. Fewer overall sales closed, and even fewer new contracts were signed.

Overall sales declined, with significant drops in sales of co-ops and older condominiums, which make up 80% of all transactions. Despite the record overall, prices for those categories either fell or rose far more modestly, a Wall Street Journal analysis found.

Much of the price surge in 2016 was limited to purchases of apartments in new developments, with the large windows, high ceilings and designer kitchens coveted by many buyers.

At 432 Park Ave., near East 56th Street, a penthouse sold in September for $87.7 million, the fourth-highest apartment price ever. Over the course of the year, the building’s developers, CIM Group and Harry Macklowe, a New York developer, closed on 75 transactions with an average price of $19.7 million. Although these deals closed in 2016, they were negotiated over three or four years.

That helped lift the median price of Manhattan apartments by the 9%, to a record $1.08 million in 2016. The average price surged almost 15% to $2.04 million, according to a Wall Street Journal analysis of New York City Department of Finance records through Dec. 19.

But the increase was far greater for new developments. As of Dec. 19, more than 2,300 apartment deals closed in new developments in 2016, the most in six years. The median price was $2.55 million, up 42% from new-building closings in 2015.

These included 182 transactions at Carnegie Park, a conversion of a rental development by Related Cos. on East 94th Street in Yorkville, at a median price of $1.44 million. Another development, Greenwich Lane on the site of the former St. Vincent’s Medical Center in Greenwich Village, closed roughly 142 transactions at a median price of $6.2 million.

Of the top 10 sales of 2016, five were at 432 Park Ave., and eight of 10 were in new developments.
The surge in new-development sales in Manhattan, which began in the second half of 2015, is already easing and is likely to slow further in the first half of 2017, brokers say.
The rest of the market, meanwhile, faltered in 2016.

Co-op sales were down 12.3% through Dec. 19. The median price was up 5.4% to $775,000 compared with 2015, but was down 3% since the third quarter.

Resales of older condominiums were down 7.6%, while the median price fell by 1.6% compared with 2015. Overall sales declined 6.1%.

Brokers and analysts attribute the slowdown in 2016 to uncertainty over the presidential election, buyer resistance to high asking prices, dips in the stock market early in the year and global economic uncertainty.

Hall Willkie, president of brokerage Brown Harris Stevens, said “gross overpricing” by many sellers has been a drag on sales, since buyers have been acutely price-sensitive since real-estate prices tumbled after the 2008 financial crisis.

 “Buyers want to know that the prices they are being asked to pay are justifiable based on recent property sales,” he said. “Once you get outside that price range, properties sit.”

Source: The Wall Street Journal

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