Despite an uptick during the last quarter, developers seem to be scaling back significantly on the number of new condo developments planned for the city. The scaling back can be seen as a positive in terms of preventing oversupply of new residential development going forward, even if at the same time it means the city’s condo boom may be nearing a close, experts say.
The number of new condominium offering plans submitted to the office of the state attorney general was down 31 percent citywide for the first nine months the year compared to the first nine months of 2006, going from 20,877 units to 14,351 (see see chart: New condo units submitted, 2006 vs. 2007).
The numbers don’t reflect projects now starting sales, but do indicate what the development pipeline will look like in 12 to 24 months, and hint at which areas might be prone to gluts in the future.
Manhattan showed by far the greatest drop in new condo filings, with a 48 percent decline in offering plans submitted during the three quarters of this year compared to last year.
Despite the credit crunch, there was an increase in new condo filings between the second quarter and the third quarter in all boroughs except Queens (Staten Island wasn’t part of the study because of the small amount of condo development there).
The rise was perhaps a result of builders rushing to get projects under way before a scaling back of the 421-a tax abatement for new development that goes into effect in 2008, experts said.
In Manhattan neighborhoods, Lower Manhattan showed the most significant drop in new filings of any area, while Harlem remained on pace see the most new developments of any location in Manhattan, and best last year’s total (see see chart: New condo units by borough).
Queens was the only borough with an increase in offering plans filed this year, with an 18 percent rise from a year ago.
Long Island City led Queens neighborhoods in number of new projects, with filings this year looking set to nearly quadruple the total in 2005, and showing that the building boom there may be far from over.
In Brooklyn, there was a 24 percent drop in offering plans submitted this year through the third quarter compared to last year.
Crown Heights, Greenwood Heights and Greenpoint were the only neighborhoods where filings this year already bested totals from 2005 and 2006, showing that developers are still planning a large amount of units in neighborhoods that some may view as marginal and may pose a greater risk than more established areas.
The Bronx saw a 31 percent decline in offering plans between this year and last, consistent with the citywide decline.
Still, despite the decline in new condo offering plans filed, data show that there may still a record amount of new housing inventory to work through.
The New York Building Congress issued a report last month finding that 34,000 new housing units will come online by the end of 2007, the highest total since 1972.
However, that number is expected to level off, and the city is expected to see a decrease in residential construction spending of around $400 million over the next two years, according to the report.
Richard Anderson, president of the New York Building Congress, said the numbers are high this year, though he expects a drop.
“There’s never equilibrium,” said Anderson (who also spoke to The Real Deal as part of a Webcast interview last month). “There’s always a shortage or an oversupply. We’re headed to some measure of oversupply.”
Anderson said the 2007 projected total was about 5,000 more new units than he initially expected, partly driven by the 421-a changes. Some real estate experts predict new building may slow down in the second half of next year once the 421-a program changes go into effect.
“There are indications already that people are starting to not purchase some apartments and definitely are starting to scale back,” says Anderson. “The question is how much it will scale back, not if it will.”