Manhattan luxury-condo supply jumps, shutting out lower-end buyers
NEW YORK - New luxury condominiums are proliferating in Manhattan, creating an excess of high-priced homes for sale at a time of limited supply for buyers seeking more affordable options.
At the end of the first quarter, 1,345 units in new developments were listed for sale, a 22 percent jump from a year earlier, according to a report Wednesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Purchases of such properties dropped 13 percent.
Resale listings, which tend to be lower priced, climbed less than 1 percent to 3,898. Previously owned apartments accounted for 88 percent of sales in the quarter, the firms said.
"The elements are there for price growth in the resale market over the next year because inventory is not growing," Jonathan Miller, president of Miller Samuel and a Bloomberg View contributor, said in an interview. "The supply isn't there."
Manhattan's sales inventory remains at historically low levels as developers focus on building luxury apartments in low- density towers to accommodate demand from wealthy investors seeking havens for cash. Owners of existing apartments have been slow to list their properties for sale because price increases in the broader market limit their options to buy something new.
Sales of all condominiums and co-ops in Manhattan fell 20 percent in the first quarter from a year earlier to 2,661 completed deals, Miller Samuel and Douglas Elliman said.
"We need people to trade up, we need people to trade down, we need people to move," said Pamela Liebman, chief executive officer of Corcoran Group, which also released a report on the market today.
Competition in the lower price tiers is "significant" as inventory "remains skewed toward expensive listings," the brokerage said in its report.
Buyers seeking alternatives to out-of-reach new developments drove up costs for existing condos to a six-year high, according to Corcoran. The median price of such deals in the quarter was $1.3 million, up 6 percent from a year earlier.
Co-ops listed for resale were purchased for a median of $725,000, a 5 percent increase, the brokerage said.
"All these new developments are great, but they don't satisfy everybody," Liebman said. "We're still suffering from a lack of traditional co-op inventory."
Condos that came to the market at the end of March include a five-bedroom unit at Naftali Group's 18-story tower under construction on the Upper West Side, listed for $12 million. The not-yet-built full-floor apartment will have a "true cook's kitchen" with a speed oven and steam oven, a 20-foot (6-meter) master bedroom, and terraces on both the north and south ends of the home, plans show.
The building at 210 W. 77th St. will have 25 apartments total, with the least expensive unit currently for sale at $4.5 million, according to real estate website StreetEasy.com.
More high-end offerings are coming this year, some aimed at setting price records. Chetrit Group plans to list a triplex at its conversion of Sony Corp.'s former U.S. headquarters for $150 million. That would top the $130 million Zeckendorf Development Co. is seeking for a penthouse at its 31-unit 520 Park Ave.
Homes priced at more than $3 million have "backlogged" in the market, growing by 5.5 percent since last year, brokerage Compass said in a separate report today.
Listings for at least $10 million jumped 41 percent in the first quarter from a year earlier. The number of apartments on the market for $5 million to $10 million rose 31 percent to 915. Listings priced at less than $1 million declined.
"Manhattan is increasingly becoming this island of the wealthy," said Sofia Song, a senior adviser to Compass who oversees its market reports. "There's still a whole segment of the market that's being underserved."
The luxury market may also be facing a challenge as a stronger U.S. dollar makes purchases more expensive for foreign buyers, who have helped to bolster demand at the high end.
Sales of luxury homes, the top 10 percent of all transactions by price, declined 20 percent in the quarter from a year earlier, according to Miller Samuel and Douglas Elliman. There were 34 purchases for $10 million or more, compared with 60 in the first quarter of 2014, Miller said.
With high-end apartments being added to the market faster than they're selling, the stage is set for some of Manhattan's priciest projects to take years to sell out, Miller said.
"The sense of urgency is not there because there's a lot more competition to consider," he said. "This product will have a much longer absorption period than was originally penciled in.