By Carter B. Horsley
Stribling & Associates, a leading luxury residential real estate brokerage in Manhattan, has predicted that prices will continue to increase in the luxury market that it defines as "more than $3 million" and the Corcoran Groups year-end report indicates that market conditions are definitely tight.
The Stribling report, prepared by Kirk Henckels, the companys senior vice president and director of private brokerage, is particularly astute at analyzing the high-end of the market.
This segment of the marketplace, he wrote, "continues to be the strongest in decades," adding that real prices, "adjusted for the impact of inflation during the period, remained roughly equivalent to the 1988 price levels until early in 1999." Furthermore, he continued, "the 1988 to 1999 property price increases, however, were not as great as the appreciation that occurred in the preceding ten-year period when the Consumer Price Index increased 82 percent between 1978 and 1988. The comparison suggest that given the extremely high current demand for luxury housing, we have not reached the top of the market. We believe that there is room for the current prices to rise further, assuming a relatively stable stock market. Our conclusion is further supported when affordability is factored into the equation. The Dow Jones Industrial average has increased approximately 440 percent since 1988 and, not surprisingly, the ratios of income to average luxury property price indicate much stronger affordability now than in 1988. The driver of the luxury market today and in the foreseeable future is the fact that potential luxury property purchasers are getting richer faster than prices for luxury properties are rising."
"The competition," Mr. Henckels continued, "is again fierce, many think too fierce, for the dwindling supply of property being offered. Young Wall Streeters are buying the luxurious new downtown loft conversions, families are searching for suitable co-operatives, condominiums and townhouses, and empty nesters are moving to New York from the suburbs and the country to have fun I the city. Each demographic group is united to the others by the expanding perception that New York City is an increasingly safe, pleasant and rewarding place to live."
The shortage of high-end inventory was explained in part by Mr. Henckels by a 1997 change in the tax laws that eliminated the ability to "roll-over" realized capital gains in excess of $500,000 for married couples, or $250,000 for individuals, into the next purchased residence. As a result, he maintained, "many potential sellers, who would incur sizable capital gains, elect not to sell their properties. Therefore, many older couples who live in large, very valuable apartments, which they may have bought three decades or more ago, do not choose to scale down, elect not to sell their large apartments and generally let the property pass to their heirs."
Stribling & Associates tracked 89 cooperative apartment sales over $3 million in 1999, versus 83 in 1998 and 65 in 1997. The average such sale increased 16.9 percent to $5.25 million in 1999, reflecting the fact that there were 6 sales for over $10 million in 1999 versus only 2 the previous year, the report said.
"One set an all-time record for the co-operative market at $20 million," the Stribling report said, "and another set a record at $10.5 million for an apartment in the East 70s .These trophy properties traded at between $1,300 and $3,000 per square foot .As 2000 begins, there are 36 pending sales over $3 million, versus 16 at the beginning of 1999 .It is well to note that the average asking price of the foregoing 36 pending deals is $4,695,000, or lower than the 1999 average price, even after factoring in price negotiation. This decline indicates a decrease in activity in the $10 million and above market I the last quarter of 999. We are observing that the demand for trophy properties is stronger than ever; however, there is a lack of inventory. In addition, there have been instances of overpricing by sellers hoping to capture the buyer for whom price simply does not matter."
The small inventory of deluxe co-ops, exacerbated by building rules in many of the better co-op buildings that limit renovation/construction work to summer months has focused more attention on the townhouse market, Mr. Henckels observed, and that rose an 48.5 percent in 1999 with 39 properties selling for over $3 million, up from 33 percent the previous year and only 21 in 1997. "This sharp increase reflects both the entrance of speculators into the market as well as sellers being attracted by rising prices .In 1999, the average luxury townhouse sale increased by 31.1 percent to $6,192,367 .There were seven townhouse sales over $10 million in 1999, versus only one in 1998 and none in 1997 .The highest sale was for $21 million in the East 60s; however, it was purchased by an institution, the Japanese Government. The family townhouse price record was a purchase made by Woody Allen in the East 90s at about $17.7 million; the previous seller had purchased this property in 1996 for $5,526,000 and performed and extensive and beautiful renovation .At the close of 1999, there were 16 pending luxury townhouse sales with an aggregate asking price of $88,050,000, an increase of 53.7 percent over the figure for the end of 1998, when there were only 7 pending sales .Currently, there are 13 houses, which were listed in the past year, at or above $10 million on the market. They are all on the Upper East Side, with the exception of the most expensive one, which is on Gramercy Park, at $18 million. It faces the park and has remarkable original details. Despite increased prices, townhouses remain Manhattans best residential buy on a square footage basis with many properties trading at or below $1,000 per square foot," the report noted.
The condo market has been fueled by the shortage of available luxury co-ops and buyers have extended their searches into other neighborhoods, "especially the hot downtown market," the Stribling report emphasized. "Witness the $10 million sale in The Chatham, unique because of its Third Avenue location, and the $9 million pending sale downtown at The Franklin Tower at 90 Franklin Street. Both buildings are architecturally important and very luxurious and breaking all price records for their neighborhoods," Mr. Henckels wrote, adding that many of the new luxury condo projects offer "various combinations of remarkable amenities, not generally available in the co-operative market, including wine cellars, separate staff apartments, high-tech wiring, fitness centers, valet parking and concierge desks."
Many of the newer luxury downtown projects are offering interior finieshes that are arguably superior than uptown projects and many of the converted loft buildings are being designed like pre-war family apartments, but with very high ceilings and a somewhat less formal layout, and kitchens and bathrooms with top-of-the-line European fittings. "Currently in the downtown market there are more than 20 pending loft sales, negotiated in 1999, for over $3 million .These sales clearly redefine Downtown, particularly TriBeCa and SoHo, as a prominent sector of Manhattans luxury housing market .The highest sale during 1999 was $6,500,000 for a multi-level, 6,000 square foot penthouse with a 3,000 square foot terrace located in a loft co-operative at 141 Prince Street. It sold to Rupert Murdoch, an example of the caliber of buyer now attracted to the downtown market. Also of note are the sales of two penthouses at 495 West Street in the far West Village, which sold at about $4 million each for unfinished space," the report said.
The year-end Corcoran Group report, which is based on 16,988 closed sales of cooperative and condominium apartments reported by Mitchell Maxwell & Jackson, Inc., a consulting and appraisal concern, and by the Corcoran Group, one of the city's largest residential real estate brokerages, found that "record-high sales prices drove the average apartment price up 19 percent to $614,000 marketwide - the largest percentage gain in 11 years." This survey tracks Manhattan residential sales south of 97th Street and of over $75,000.
"Typical buyers were younger than the year before and many more were single versus married. They also responded to the scarcity of property for sale and moved quickly, viewing 11 percent fewer apartments before making a decision to buy. Time on the market and negotiability stablized marketwide thus indicating that prices will most likely continue their ascent into the New Year," the report began. Larger apartments continued the trend of recent years of showing the greatest increases in sales prices: up 27 percent to $4,512,000 (including coops and condos).
The cooperative apartment market on the Upper East Side from 57th to 96th Street remained strong based on 4,018 recorded sales: on Fifth Avenue, for example, one-bedroom units average $562,000; two bedroom-units average $1,323,000; three-bedroom units averaged $2,666,000; four or more bedroom units averaged $6,756,000. The average price of 86 Fifth Avenue coops sold in 1999 was $2,426,000 as compared to $1,900,000 for 105 such units the previous year, the report found. On Park Avenue, the increase was not as dramatic as 179 units were sold last year for an average price of $1,783,000 as compared to 193 units at an average price of $1,557,000 the prior year, it continued.
Condo sales on the East Side between 42nd and 96th Streets rose even more, 33 percent to an average sales price of $890,000 for 2,681 such recorded sales. The report found that the average sales price of 211 condos between 51st and 86th Street and Fifth and Park Avenues was $2,442,000 in 1999 compared to $1,540,000 for 158 units in 1998. From 57th to 87th Street between Lexington and Third Avenues, the report found that the average price of 260 apartments sold was $978,000 as compared to $735,000 for 201 units the prior year. From 42nd to 79th Streets and Second Avenue to the FDR Drive, the report found that the average sales price for 283 condos was $581,000 as compared to $554,000 for 237 units the year before, one of the few areas not to experience significantly increased values.
The Upper West Side Cooperative market showed a 13 percent gain to an average sales price of $478,000 based on 2,705 recorded sales between 57th and 96th Streets, the report said. On Central Park West, 12 one-bedroom units sold for an average of $303,000, 51 two-bedroom units averaged $847,000, 42 three-bedroom units averaged $2,410,000 and 13 larger units averaged $4,325,000.
The West Side condo market climbed 9 percent to an average sales price of $716,000 based on 2,386 recorded sales from 42nd to 96th Streets. The report noted that "With most of the new development in the West 60's sold out, sales in the West 80's gained speed with prices rising an average of 24 percent. Larger apartments in every neighborhood were most popular and prices rose accordingly. Meanwhile, several new development projects should result in even greater buyer interest and value for the entire area.
Cooperate apartment sales south of 34th Street saw the average sales price increase 11 percent based on 2,075 recorded sales. In the Gramnercy area, 49 studio sold for an average of $142,000, 76 one-bedroom units sold for an average of $245,000, 36 two-bedroom units sold for an average of $465,000 and 3 larger units sold for an average of $1,236,000. Greenwich Village had 348 sales that had an average price of $344,000; Chelsea had 135 sales at an average price of $304,000; and Gramercy had 164 sales at an average price of $297,000.
Condo sales south of 34th Street recorded the least amount of time on the market in Manhattan, according to the report, which also noted that studio prices were up an average of 20 percent and "Murray Hill came alive, with the largest volume and sale price increases. The average sales price in this Downtown section rose 12 percent to $370,000 based on 1,471 recorded sales. The West Village was the most expensive with 75 sales that averaged $491,000, followed by Union Square, which had 77 sales that averaged $366,000 (actually a decline from the previous year's average of $377,000), and Murray Hill, which had 286 sales that averaged $350,00.
The Downtown loft market gained 19 percent based on 1,399 recorded sales of both condo and coop lofts. SoHo had the highest prices with 101 sales that averaged $1,271,000, followed by 231 sales that averaged $1,052,000 in TriBeCa, and 261 sales in the Village and Chelsea areas that averaged $912,000.
The townhouse market in Manhattan south of 96th Street witnessed a 27 percent increase in average sales price to $4,123,000, based on 210 recorded sales of one- and two-family houses, the Corcoran Group noted, adding that such sales "were hot just about everywhere."