The numbers say New York City’s condo market is in trouble.
About one in four new condo units constructed since 2013 are unsold — or about 4,100 — and, of the units that did trade, 38 percent are back on the market as rentals, according to a StreetEasy analysis published by the New York Times.
The latter finding about investor activity raises a red flag for the listing platform’s economist Grant Long in particular.
“That’s the group of folks that could go away at any minute — if there’s a recession, people just want to put their money in Treasury bonds,” he told the Times.
One example is developer Larry Silverstein’s 30 Park Place condo. Though the building is roughly 90 percent sold at an average price of about $3,280 per square foot — the developer himself bought the penthouse — about 58 percent of buyers have relisted their units as rentals, StreetEasy found.
Other analysts say the pool of inventory is even larger than StreetEasy’s self-proclaimed “conservative” calculations. Appraiser Jonathan Miller puts the number of unsold condo units in Manhattan alone at 9,000 — that includes buildings under construction and “shadow inventory” that sponsors are withholding from the market. By Miller’s count, it would take nine years to sell the backlog.
To address the staggering oversupply, the hallmarks of the market increasingly now include sponsors paying agents larger commissions (sometimes in advance of closings), fronting buyers’ closings costs, and agreeing to rent-to-own schemes or heavily discounted bulk deals with investors. The latter, Douglas Elliman’s Simon Bacon noted, were last seen in the 2000s as “the bottom dropped out.”
At 100 Barclay, Ben Shaoul’s FiDi condo conversion, Corcoran Sunshine Marketing Group confirmed to the Times that rent-to-own offerings landed at least 11 contracts in the building since the spring.
In the Lower East Side, Extell’s One Manhattan Square is single-handedly responsible for the neighborhood’s 32 percent condo sales rate, which is the lowest in the city, according to StreetEasy. The building was 20 percent sold as of mid-August, even despite the developer’s offers to pay a decade worth of common charges to lure in buyers.
All of this comes in addition to other headwinds including talk of a recession, a slowdown in foreign buyer activity and the threat of a new pied-à-terre tax. Also this year, new mansion and transfer taxes were enacted in New York and the federal new cap on state, local and property tax deductions went into effect.
“People don’t realize this is already as bad as it was after Lehman, purely from a supply standpoint,” Mark Chin, CEO of Keller Williams Tribeca, told the Times. [NYT] — Erin Hudson