The Real Deal New York

Luxury Manhattan sales market set to slip following Wall Street’s compensation declines

March 13, 2012 09:00AM

source: Bloomberg News (Wall Street bonus data reflects compensation from two years prior)

The high-end Manhattan real estate that has propped up an otherwise stagnant sales market, is likely to begin a decline of its own in 2013 and 2014. According to data from the New York State Comptroller’s office and Miller Samuel CEO Jonathan Miller cited by Bloomberg News, the top 10 percent of the Manhattan condominium and co-op market tends to follow the pattern set by Wall Street bonuses two years earlier (see chart above).

Considering that the average bonus fell 13 percent last year to $121,150, nearly 40 percent below the 2006 peak of $191,360, luxury home prices are probably on their way down.

The peak of Manhattan’s high-end market occurred in 20008 — exactly two years after the height of Wall Street compensation — when the average price of a transaction in the top 10 percent was $6.33 million. Last year the average price was $5.49 million, according to Miller.

“People are making decisions a year or more down the road because they’re getting their deferred cash,” he said. “We may see a little weakness in 2012,” and “next year could be weaker based on this trend of lower compensation.” [Bloomberg]

  • EmileZola

    Past experience has shown purchasers at this level underbuy price-wise relative to their incomes (their maintenance and debt service costs are typically below or even well below 15% of their income). As such the trend discussed here will hold up only if a negative psychological atmosphere is also present. I anticipate this will not be the case and a positive attitude regarding the market will supersede the drop in bonus income since an easy capability will still be present…we’ll see.

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