The Real Deal New York

Is the S&P 500 a better investment than Manhattan condos?

CityRealty analysis compares prices at 100 luxury condo buildings to index fund

November 05, 2015 06:05PM

Luxury Condos

From left: 432 Park Avenue (credit: DBOX), One57 (credit: Extell) and Central Park Tower

While Manhattan luxury condos have gained a reputation as a preferred store of wealth for super-rich investors the world over, those well-off Russian oligarchs and Chinese industrialists may have been better off investing in a boring old index fund instead.

Real estate analysts at CityRealty, curious how the top end of the city’s condo market fared against less glamorous investments, recently compiled the average price per square foot across a collection of 100 prominent Manhattan condo buildings.

They found that the value of those condos rose 55 percent in the past decade, from an average of $1,530 per square foot in 2005 to $2,371 per square foot this year. While that was good for a compound annual growth rate of 4.5 percent, it was no match for the S&P 500 – which had a 5.4 percent annual growth rate over the same period, according to Bloomberg.

Still, that doesn’t mean the likes of Bill Ackman and Ken Griffin should have bought index funds instead; as Bloomberg notes, the analysis makes for an interesting but imperfect comparison.

There’s no simple way, for example, to by and sell shares in the collection of 100 buildings analyzed by CityRealty, and the condo data is based on a limited number of transactions that have skewed higher thanks to the trend toward increasingly expensive apartments.

And then there’s the fact that, if you buy a $100 million apartment as an investment, you’re also able to live in it. That helps.

Meanwhile, none other than Donald Trump recently fell victim to a similar analysis by the Washington Post. [Bloomberg]Rey Mashayekhi