Buyers in the third quarter were hungry for new development condominiums priced between $1 million and $3 million, and developers were there to meet them with an influx of new supply.
In Manhattan, 54.7 percent of all contracts signed during the third quarter fell into that middle-market range, up from 51.4 percent at the halfway point of the year, according to Halstead Property Development Marketing’s quarterly new development report.
That shift is impacting median pricing, which fell 15.7 percent in Manhattan to $2.15 million in the third quarter.
“There’s a lot of talk about pricing coming down, but what they’re really talking about is pricing shifting with the availability of product,” HPDM Stephen Kliegerman told The Real Deal. “There’s a shift in direction to more modest-sized one-, two- and three-bedroom apartments. That unit type has brought the median price down.”
The shift was even greater in Brooklyn, where the share of $1 million-to-$3 million condos grew nearly 17 percent to 69.2 percent in the third quarter, the report shows.
But Kliegerman said that whereas developers in Manhattan were moving toward smaller, more moderately-priced apartments, Brooklyn is trending upward toward luxury.
Projects like Xinyuan Real Estate’s the Oosten – which set a Williamsburg record when a penthouse went into contract in August for $6.5 million – and Toll Brothers City Living’s Pierhouse condos in Brooklyn Bridge Park are pushing the needle toward higher-priced luxury in the borough, Kliegerman said.
“I think we’re going to start to see some very significant closings in Brooklyn between the $3 [million]-to-$6 million marketplace that didn’t really exist en masse before this year,” he said.
Further proof of the diverging trends in the boroughs can be gleaned from the difference between closing and contract pricing.
In Manhattan, closed deals representing contracts that were signed roughly 12 to 18 months ago were averaging $2,271 per square foot. Pricing for recently signed contracts fell to $2,070 per square foot.
In Brooklyn, contracts are averaging $1,407 per square foot, up from the average closing price of $1,345 per square foot.
Last week, TRD examined the condo pipeline in Manhattan and found that supply has grown steadily for the past three years since bottoming out at 12,602 units in the third quarter of 2013. Although developers have targeted the luxury market in this cycle, experts and TRD‘s own data point to demand being strongest in the middle and lower segments of the market.