Condominium prices in Long Island City have responded to a dwindling inventory, especially of smaller units, and are rising for studios and one-bedrooms while falling for larger homes, a market report released today by the brokerage Modern Spaces showed.
Just 6 percent of the existing condominium inventory is currently available for purchase. Modern Spaces, which has spoken with developers such as TF Cornerstone and Rockrose Development about their forthcoming projects, expects just 250 more condo units to be delivered in the next 24 months, which would further depress supply. (By comparison, Modern Spaces has brokered the sale of about 100 units in newly developed buildings just in the first half of 2012, according to CEO Eric Benaim.)
As a result, Benaim said he expects the price per square foot to rise substantially after previously posting large year-over-year gains at the end of 2011. At that time, price increases were largest among two- and three-bedroom units.
However, through the first half of 2012, the average price per square foot of sold condos in Long Island City had actually decreased for larger units. Two- and three-bedroom units sold at an average of $735 and $772 per foot, respectively, in the first half of the year, a decline of 2.6 percent and 2.2 percent from the same sixth months of 2011. On the other hand, studios and one-bedrooms sold for an average of $725 and $742 per square-foot, up 4.0 percent and 5.8 percent over last year. The overall average price per square foot this year was $744.
Benaim attributes the narrowing price gap between larger and smaller units to the market availabilities. Two-bedroom units comprise 38 percent of the available inventory and represent 52 percent of all units sold in the first half of 2012. Meanwhile, 45 percent of the available inventory are studios or one-bedrooms. Benaim also suggested that though the final price per square foot may have stagnated, he’s noticing fewer incentives and shrinking discounts off asking prices.
Like the sales market, Long Island City’s rental market shows growing prices for studios and one-bedroom with prices stagnating for larger units. For example, rents for luxury studios average $2,120 in the first half of the year, up 16.0 percent from their $1,828 average at the same time a year ago. But rents for two-bedroom units in luxury buildings fell 16.8 percent to $3,205. The neighborhood’s overall vacancy rate stood at 5 percent.
With its recent expansion into Williamsburg, Modern Spaces issued its inaugural Brooklyn sales market report. The brokerage separated the Williamsburg waterfront from the rest of the neighborhood in order to examine price trends in the region dominated by new development. The average price per square-foot in the so-called “Williamsburg West” neighborhood for closed sales in the first half of the year was $917. One- and two-bedroom units, which made up two-thirds of all sales in the area, averaged $617,004 and $939,643, respectively.
Benaim said the waterfront is another area that’s being plagued by a shortage of inventory. Though some developers want to respond to the growing demand for condos in both Long Island City and Williamsburg, Benaim said they are being prevented from doing so by lenders and city politics. Banks are hesitant to underwrite condo projects — no matter how many market reports they’re shown — and with the elimination of tax exemptions in those neighborhoods, developers can’t afford to build new luxury units.
“Everything that’s being developed right now is hitting the market as rentals,” Benaim said.