Rupert Murdoch’s record-setting deal to buy a $44 million Fifth Avenue penthouse provided a shot in the arm for the high-end Manhattan apartment market in December, as overall inventory shrank, brokers and appraisers said.
Murdoch’s agreement to purchase the late Laurance Rockefeller’s triplex co-op at 834 Fifth Avenue capped a season that saw a good number of high-priced transactions.
“The reported sale did more to energize the upper-end market than any Wall Street report could,” said Kathy Korte, manager of Sotheby’s Midtown office. Some buyers had bet on a drop-off in prices after the start of the year, “but I think that is wishful thinking on their part. There has been a new energy in the market since after the election.”
Jonathan Miller, president of the appraisal firm Miller Samuel and author of the Douglas Elliman Manhattan Market Overview, said the upper-end of the market appeared to be “healthy.”
“We have seen a lot of transactions in excess of $5 million since this fall,” he said. “Those deals set the tenor of the market, and it says that people feel pretty confident about the market over the next year.”
Miller said in mid-December that there had been a drop in overall transactions compared to the month before, but attributed it to the usual slowdown after Thanksgiving.
He also said the market was seeing price increases, “but not at the level we’ve seen in the last couple of months.”
Miller said he anticipated 3 percent growth in fourth-quarter prices.
Inventory always in short supply was expected to show further decline for December following a significant drop-off in November.
The number of condo and co-op exclusive listings tracked by Miller dropped to 4,694 in November, down from 5,207 the month before, a 9.9 percent decrease. Listings were down 6.7 percent compared to November 2003.
“There was a noticeable drop,” Miller said.
Previously, inventory had been relatively flat at around 5,100 listings from April through October.
The first quarter will be critical, as buyers are flush with cash in January and February. Wall Street bonuses were widely projected to be 10 to 15 percent higher than the previous year. Korte said she expected a few top earners to “do a lot better” and spur three or four massive, top-of-the-market buys in 2005.
Korte also said Europeans were in the market in bigger numbers due to the weak dollar. “We’re seeing a lot of people contact us for investment properties, gravitating to new development,” she said.
Overall, Miller said he doesn’t expect to see price increases in 2005 equal to 2004’s price gains.
“I don’t think it will appreciate at the same pace as 2004, and I don’t know if it would be healthy if it did,” he said.
Jeffrey Jackson, chief economist at appraisal firm Mitchell, Maxwell & Jackson, said he is seeing the market enter a new phase.
“The market appears to be entering unfamiliar territory equilibrium,” he said. “Statistically and anecdotally we see a balanced market with the expectations of buyers and sellers generally in line.”
Mortgage rates will rise moderately, Miller predicted.
“I think they will trend up through 2005 as a result of the improving economy,” he said. “There will likely be only modest increases, because the Fed is doing everything it can to prevent inflation.”
Miller said he expects more residential units to come online in 2005 compared to 2004.
Some industry leaders have pointed to overbuilding in the residential market (see “Predictions for 2005” story in this issue), but Korte disagreed.
“The outlook is very bullish,” she said. “It’s been 10 years since I’ve heard something like that.”