NYC condo market showing signs of a recession
The latest numbers show more signs of trouble for New York City’s condo market.
About 25 percent of new condo units constructed since 2013 — about 4,100 — are unsold 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 last month.
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 — the number 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.”
On the Lower East Side, Extell Development’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, despite the developer’s offers to pay a decade’s worth of common charges to lure buyers to the property.
And now, Extell is launching a “rent-to-buy” program to spur deals at One Manhattan Square, The Real Deal reported in late September. In an email announcing the incentive, the developer said renters will be able to apply a “full year’s rent” to their purchase of a unit at the Lower East Side condo.
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. — Erin Hudson
Manhattan and Brooklyn see record high rents while concessions slip
New York’s new rent laws haven’t put a damper on the cost of market-rate leases in Brooklyn and Manhattan.
Monthly rental prices in both boroughs hit new highs in August as concessions decreased slightly, according to Douglas Elliman’s latest market report.
In Brooklyn, following eight consecutive months of growth, the median rent price climbed to a record of $3,015,while Manhattan’s median rent price reached $3,500.
At the same time, median rents in Northwest Queens fell 1.2 percent, to $2,960.
The report showed that concessions are sliding but remain high overall, despite predictions they would melt away as the rental market strengthened.
Hal Gavzie, Douglas Elliman’s executive manager of leasing, said he didn’t predict there would be any dramatic changes to concession trends in the next year.
Gavzie handles one of Elliman’s offices in Queens, where the median rent fell for the third time in 2019, according to the report. He said the trend was tied to the large amount of new development in the area.
Queens is becoming increasingly attractive to New Yorkers as prices in Manhattan soar. In the past two months, median rents for studios and one-bedroom apartments in the borough hit 11-year highs, according to the report. For a studio, that translated to $2,700. For a one bedroom, that meant a median price of $3,595. — Sylvia Varnham O’Regan