New York City Developers Are Relying On A Shrinking Pool Of Buyers

Most of New York City’s largest developers are probably optimistic about the near future now that one of their own is occupying the most powerful office in the world. Bu, this very specific group of taxpayers stands to benefit immensely from several of the provisions that have appeared in the Senate or House plans: Repealing the AMT and estate taxes would allow them (and their heirs) to shave a pile of percentage points off their tax bills. And those are just two examples.

To be sure, the tax plan’s passage isn’t assured – now that Alabama Democrat Doug Jones has defeated Republican Roy Moore. With Jones expected to be seated some time after New Year’s, the time pressure facing Republicans has intensified. Because at the start of the next Congress, their already precarious two-vote majority will shrink to one. Beyond this, Republicans haven’t agreed on a final version of the bill yet, and existing differences between moderates, deficit hawks and conservatives within the party could prove insurmountable.

But regardless of what happens with the tax plan, there’s a much more pressing problem facing developers in the Big Apple: A glut of “luxury” apartments priced in the low-seven or high-six figure range is coinciding with a precipitous drop in sales volume, according to Reuters.

While prices have been steady in recent years, sales volume for condos in Manhattan are still 30% below their pre-crisis peak.

In other words, the market’s dependence on a small, well-heeled pool of buyers – a pool that is shrinking as prices rise to unsustainable levels and wealth in the US becomes increasingly concentrated in the hands of the wealthiest – could be a major vulnerability in the coming years.

In the past five years, however, Manhattan has seen a different kind of development boom. Prices for these units are higher than they ever were before but the number of units built and sold is way off levels achieved a decade ago, Warshawer said.

 

“As prices have risen, less of the market share is comprised of cheaper units,” she said.

 

In 2013, 7,787 units were sold for under $1 million for a total $4.7 billion in sales. This year is projected to end with 5,040 units sold at under $1 million for $3.4 billion in sales.

Indeed, apartments priced in the seven-figures are increasingly going unsold – while affordable housing becomes increasingly harder to

The median sales price of high-end apartments edged higher in 2017, but the closely watched average square-foot price slid a bit for condos as prices leveled off after years of heady growth, the report said.

 

While the average and median sales price for all residential units has jumped since 2007 by 61 percent to $2.2 million and 44 percent to $1.2 million, respectively, transaction volume is off 30 percent from peak activity a decade ago, CityRealty said.

 

CityRealty examined sales registrations from the city’s Department of Finance. Much of Harlem and nearby areas were excluded because its market size.

Units sold at 432 Park Avenue, a 96-story tower marketed by developers as the tallest residential building in the Americas, garnered the most number of sales in a listing of the 25 highest-priced condos, CityRealty said. But elsewhere, the ultra-high-end market is suffering as nearly a third of the apartments in Manhattan’s recently developed “Billionaire’s Row” have gone unsold.

As we highlighted back in August during Starwood Property Trust’s Q2 earnings call, CEO Barry Sternlicht warned of a doomsday waiting at the end of New York's "Billionaire's Row", predicting an imminent "debacle." He mentioned the out-of-balance mezzanine loan at JDS Development and Property Markets Group’s 111 West 57th Street project and predicted more distress in the luxury residential market, including at 53 W 53, a supertall condo being developed next to the Museum of Modern Art by Hines, Pontiac Land Group and Goldman Sachs.

“We are beginning to see the cracks of the high-end residential market in Manhattan,” Sternlich warned.

Indeed, and while developers stand to benefit personally from the Republican plan, proposals to eliminate or reduce the mortgage deduction or deductions on state and local taxes could further damage their sales figures by favoring renters over buyers.

Comments

SantaClaws Wed, 12/13/2017 - 18:41 Permalink

The developers have no worries.  Mayor de Blasio likes putting NYC homeless in luxury buildings.  Unlikely the homeless numbers in NYC will be declining anytime soon.

wisehiney Wed, 12/13/2017 - 18:43 Permalink

And I am relying on a slow ass mutha fucka to take me to this Christmas party.He damn sure ain't gonna get me there in a new yawk minute.(taps foot as he pours another)

tangent Wed, 12/13/2017 - 18:51 Permalink

Congrats to the party that ushered in slavery and the KKK on winning the Alabama senate seat. Its a great day for the KKK to celebrate their victory with their Democrat party win. I'm happy for them and wish them luck with their future tactics of dividing everyone into biology based voting blocks. Meanwhile I have moved to my ideological favorite place far away from Alabama based more on moral values and principles rather than exploiting victims and keeping them down with "welfare" programs very well proven to make things worse for blacks and destroy their families. But, good for them. Best of luck for Dems to do what is right... they need all the luck in the world right now.

Endgame Napoleon tangent Wed, 12/13/2017 - 19:57 Permalink

After being elected with a 10% turnout, he started things out by — shock — dividing the wildly gesticulating audience into their proper identity politics categories, addressing all the different groups that he panders to with a separate message, none of it having much to do with mass [under]employment in America.

In reply to by tangent

resistedliving Wed, 12/13/2017 - 18:52 Permalink

nary a word about the monthly carrying charges for these apartments. with retail in the crapper, who do you think will have to carry the amenities?  the tenants. Rising interest rates, huge cc, tax write offs diminished, whose going to buy these things at these prices? 

RussianSniper Wed, 12/13/2017 - 18:53 Permalink

In a very short time, crypto multi hundred billionaires may buy up entire city blocks in Manhattan, in order to provide shelter to thousands of the world's refugees.

The exact same for Brentwood, Hollywood, Malibu, San Francisco, and so many more.

JustPastPeacefield BarkingCat Wed, 12/13/2017 - 23:23 Permalink

I would flood Nantucket, The Vineyard, ptown (rabidly anti-homo Islamics only), Beacon Hill (hello John Kerry!), Newton (the fancy Jew sections), Weston, Wellesley (the fancy Jew sections), Canton (fancy Jew sections), ...And in the summer, I would sponsor Hip Hop festivals every weekend on Commonwealth Ave, from the Public Garden to Dartmouth. Massive audio stacks with big, heavy base. Weed, weed, and more weed. Niggas everywhere! Wall to wall niggas from noon to 4 am when they start to finally pass out. And when those rich, dipshit blond progressive cunts call the cops, I'm gonna scream RACIST! And by the way, those ain't firecrackers you hear. See how you like it bitchez. 

In reply to by BarkingCat

I Write Code Wed, 12/13/2017 - 21:06 Permalink

A million dollar condo is chicken feed, $6k/month for mortgage, plus tax and fees, call it $8k/month, that nicely zeroes out the federal and state taxes for a household income of maybe $200k - $300k, which is a lot of people in Manhattan.  With this new tax bill, well, we'll just wait and see, hmm?But this is stuff a Chinese factory foreman might invest in, if he can get his money to NYC.  Richy-rich stuff starts at maybe 10x this up to 50x, that's where your Russian oligarchs live, well, invest, they wouldn't be caught dead owning a million dollar condo.*of course, if then that makes Manhattan your primary residence, then the city and state get to tax the bejebus out of you, too, that might double the cost of your million-dollar cracker box.

Edgar Kravitz Wed, 12/13/2017 - 22:48 Permalink

You should take a look at Boston,  ...huge building boom going on, mostly residential,  some commercial.  Who's buying all these overpriced waterfront condo units?  The bitcoin generation?  Who else could afford these F-You price tags?