Gregory J. Heym
Executive Vice President, Chief Economist
By ADAM BONISLAWSKI
THERE'S been no shortage of gloomy talk lately regarding the Manhattan real estate scene. The Bear Stearns collapse, the Wall Street layoffs, the ongoing credit crisis - even your most relentlessly upbeat broker would have to admit that it's starting to get messy out there.
And so, when the Q1 sales figures hit the street last week, there were expectations that the numbers might look a little anemic.
Yeah, well, not so much.
In fact, far from looking anemic, the numbers looked spectacular. According to data from Prudential Douglas Elliman (prepared by appraiser Jonathan Miller of Miller Samuel), the average price of a Manhattan apartment jumped 33.5 percent over the last year. Halstead Property calculated an even bigger increase, putting the average price of a Manhattan pad at a record $1,690,995 - up 47 percent from a year before.
How can that be, given the financial unrest all around us? Three words: the luxury market.
It's not every quarter, after all, that a pair of super-high-end properties like 15 Central Park West and the Plaza boast 84 closings between them. Take those two buildings out of the mix and the average price increase calculated by Halstead falls by more than half to a (no doubt still healthy) 23 percent.
Even with 15 CPW and the Plaza accounted for, though, the picture remains quite distorted by the high volume of high-end sales. In fact, the number of sales of apartments priced above $10 million was up 381 percent over Q1 of last year.
"There were four sales that were over $30 million in this quarter," notes Gregory Heym, Halstead's chief economist. "We had five all of last year."
Look beyond the gaudy luxury stats, though, and Manhattan appears to be a bit less of a boomtown. "I think the number to look at going forward isn't price," Miller says. "It's sales level, inventory and time on the market."
Each of those figures, as Miller's report notes, moved in a negative direction (for owners, anyway) during Q1. Inventory was up 4.6 percent, properties sat on the market an average of 15 extra days, and the number of sales was down 34.3 percent compared to Q1 of last year - and down 15.3 percent compared to the Q1 average for the last five years.
Add to the mix the fact that, as Heym notes, 30 percent of this quarter's closings were for new developments - meaning the purchases were most likely made in the more favorable market environment of a year to two years ago - and you have a somewhat bleaker scenario. And the full effects of the much-discussed Wall Street and credit woes could still be to come. In fact, Miller suggests he's more concerned about the market's prospects in '09 than this year. Heym sees an unsteady future as well.
"As much talk as there's been about Wall Street layoffs, not many of those people are off the payrolls yet," he says. "It takes time for all this to work its way out. There's a lot of turmoil, and it seems to be increasing rather than decreasing."
Of course, Rodrigo Nino, president of brokerage firm Prodigy International, notes that the credit crisis and sluggish stock market (along with the weak dollar) could present a silver lining. After all, the moneyed classes, including the kind of wealthy foreign buyers Nino often has as clients, have to stash their cash somewhere.
And if securities aren't looking so hot, well, a spread at a luxe new development like 15 CPW might seem like an even more attractive investment. "I think that the deeper the crisis gets, the better it will be for the high-end market in Manhattan," Nino says.
What's that they say again about the rich getting richer?
Thursday, April 10, 2008