Despite some major high-end deals closing last month, Manhattan’s luxury residential market, which has been strong since the third quarter of 2010, may soon lose its reputation as the most talked about sector in the real estate industry, according to Jonathan Miller, president of appraisal firm Miller Samuel.
While the luxury market is still strong, “it’s just not dominating conversation like it was,” Miller said, with inventory rising and only 17 sales over $10 million closing in the first quarter of 2012, the same number as in the fourth quarter of 2011. By contrast, 25 such sales closed in the third quarter of 2011 and 28 closed in the second quarter of 2011, he said, citing a first-quarter 2012 residential market report by Prudential Douglas Elliman released today.
Smaller residential units are taking the spotlight; studios and one-bedroom units together had the largest market share in the first quarter of 2012 since 2009, when first-time homebuyer tax credit incentivized first-time homebuyers to pull the trigger.
One-bedroom sales made up 39.3 percent of all first-quarter 2012 transactions, while studios accounted for 16.9 percent of sales. The reason for the jump in market share, he said, is a drop in mortgage rates and rising rents.
Meanwhile, Manhattan’s general transaction activity remained steady during the quarter, according to quarterly reports issued by the Corcoran Group and sister companies Halstead Property and Brown Harris Stevens, which use the same data.
The average sales price per square foot for a Manhattan co-op was $825 in the first quarter of 2012, according to Corcoran’s report, while the average price for a condominium unit was $1,264 per square foot. In the fourth quarter of 2011, by comparison, the average co-op price was $3 less $822 per square foot and the condo average was $38 less at $1,226 per square foot.
With 2,700 closed sales by all Manhattan brokerages in the first quarter of the year, there were 60 percent more transactions than in the first quarter of 2009, when sales hit rock bottom, according to Corcoran, which cited the cause as condo availability eroding at a much higher rate than co-op inventory. The number of sales this quarter was even with the first quarter of 2011 and a 1 percent increase on the final quarter of 2011.
Total market-wide listings declined 9 percent versus a year earlier to 8,367. Similar to Elliman’s findings showing strength in the market for smaller units, the Corcoran report shows that sales under $1 million accounted for 61 percent of deals closed during the first quarter.
Meanwhile, on the new development front, limited new product is leading supply constraints, Corcoran said, and pushing prices higher. Halstead’s and Brown Harris Stevens’ reports show new developments accounting for 41 percent of all condo closings, up from 35 percent in the first quarter of 2011.
“People had signed the death warrant of new development,” said Gregory Heym, chief economist for Terra Holdings, parent company of Halstead and Brown Harris Stevens, “but new developments are coming back strong.”
Elliman CEO Dottie Herman conveyed a similar statement: “We’ve signed up a lot of new development projects that will not be built for a year or so. Some we can sell, some we can’t yet. We haven’t seen a lot of development for six years but now it’s coming back.”
The Halstead and Brown Harris Stevens reports champion the well-documented highs of the luxury market in the first quarter, including the record-setting sale of Sandy Weill’s apartment at 15 Central Park West, which had a significant impact on average sales prices for the quarter.
Heym attributed such high-end sales to the recovery of Wall Street bonuses, which totaled $20 million in cash last year, according to the Office of the New York City Comptroller, and to interest from foreign buyers.