With the average price of a Manhattan townhouse passing the $4 million mark last year – double the average price of five years ago – some brokers believe it’s the hottest segment of the current real estate market.
A bevy of Upper East Side luxury townhouses have hit the market with asking prices north of $20 million. Townhouse prices are catching up Downtown and the Upper West Side, although the Upper East Side still dominates.
The average price of a Manhattan townhouse increased 10.1 percent last year to $4,041,650, double the $2 million price level of 1998, according to a Douglas Elliman report prepared by Miller Samuel appraisers.
Jeff Wolk, co-principal of Fenwick-Keats, said the surge in prices in recent months has outpaced last year’s gains.
“We are seeing a 15 percent increase in the last six months since the financial markets have become very strong,” said Wolk, whose company launched a new townhouse division in March as a bridge between its brokerage and management businesses.
“They’ve always been hot properties,” said Jed Garfield of Leslie J. Garfield & Co., a boutique firm that specializes in townhouses. “But perhaps there’s a new recognition that it is a more economical way to live than a co-op or condo.”
Jonathan Miller, president and co-founder of Miller Samuel, said the gains are consistent with the overall market, including the market for co-ops and condos.
“With all properties in high demand, inventory being so tight, low mortgage rates and the improving economy, all those factors together make it feel like townhouses are a hot property,” he said.
As evidence of the increased activity, since early April, a quartet of Upper East Side townhouses with asking prices totaling $100 million has hit the market. Prices are catching up in other parts of the city, he said.
“The Downtown market saw the largest gain in average sale price last year,” said Miller. “It increased 14.4 percent, while the Upper East Side and Upper West Side increased 6.7 and 3.3 percent respectively as Downtown became an alternative townhouse location.”
Wolk agrees. “Downtown is catching up quite a bit, especially in areas like the Village or Chelsea,” he said. “It’s showing as much strength as it has since 9/11.”
“The West Side is rising in value quite aggressively,” Wolk added. “I expect it won’t be long before you see a $10 million townhouse sold on the Upper West Side.”
Garfield said he has seen a similar increase in demand on the Upper West Side. “The Upper West Side and the Village traded at a 10 percent discount,” he said. “In the last three or four years, the Upper West Side demand is just surging.”
Throughout Manhattan, Miller pointed out that over the last 10 years there has been a significant percentage increase in townhouse prices because they were undervalued in the past.
“Between 1994 and 2003, coops increased 93.8 percent and townhouses increased 213.3 percent,” he said. “As quality of life factors like safety were addressed in the mid-90s, it had an effect on townhouse living. People started to stay in the city and townhouses became an attractive alternative.”
The rising cost of townhouses and apartments have now become pretty comparable, said Miller. Last year, the average co-op increased 8.4 percent and townhouses increased 10.1 percent, he said. “There hasn’t been a significant difference in recent years.”
Townhouse inventory contracted last year, and 10 percent fewer townhouses transferred ownership than in the previous year, according to the report.
The average price per square foot also declined 2 percent, which may be attributable to an increase in the average size of townhouses for sale last year, the report said.
Going forward, Garfield and Wolk differ on their predictions about the direction of the townhouse market.
“For the time being, as long as Wall Street does well, luxury real estate will do well,” Garfield said. “It’s inevitable that in the post-election climate, regardless of whether Bush or Kerry wins, that some rates have to go up, and that will put a damper on the real estate market.”
Wolk is more optimistic.
“We are currently getting signed contracts within 30 to 45 days, instead of the traditional six to nine months,” he said. “As long as the economy continues to remain strong, I see no reason why it won’t continue.”
“The strength of the real estate market is outpacing the economic market of New York,” Wolk added. “It is one of the strongest markets in Manhattan, and one of the strongest sectors of the local economy, and will certainly continue through the remainder of the year.”