Gregory J. Heym
Executive Vice President, Chief Economist
Experts assert that there is a lot of strength in the Manhattan luxury market
David Watkins in New York
How do you distinguish luxury from the norm in a market where the average flat sells for more than US $1 million? Such is the wallet-crushing problem posed by Manhattan - and that is after residential real estate prices fell this summer. Indeed, talk of a bubble in the New York market is rife, and recent months have only added to the speculation.
The average price of a Manhattan apartment dropped from US$1.332 million in June to US$1.145 million in August - a decrease of 14 per cent, according to real estate company Halstead Property. And yet according to the analyst who compiled the report, such a figure was not as dramatic as it might appear.
"There is a seasonal effect to the market," said Halstead Property's Gregory Heym. "There are times of the year that are stronger than others, and most people would consider the spring season to be the peak time for the market. It follows the school year - people want to buy, be moved in time for school. So we don't compare a month to a prior month. We compare this time to the equivalent time a year ago.
"Some people jump in at any sign of a decline to say that the bubble is bursting," he added. "Even if all the indicators are down, you can't look at one month and say that's it. People are always looking for that chance to call the market."
Likewise, other analysts refute the bubble concept.
"There is not a bubble in Manhattan's real estate market - there's no way," said Kirk Henkles of Stribling and Associates. "We have cash-rich buyers, an incredibly low inventory and a positive economy. It just doesn't add up. We have never had a decline in prices without a precipitating economic event."
Mr Heym, meanwhile, said: "Obviously the whole market hasn't been very strong for the past couple of years."
And yet the issues faced by those looking to gain a foothold on the property ladder - where the average price per sqft is US$970 - seem to evaporate when it comes to those dealing with the luxury market. "Certainly, there is a lot of strength in the luxury market," Mr Heym said.
"The era of low interest rates has certainly helped - they've never been this low for so long. We have had a lot of new developments come on in the luxury market here, particularly in Manhattan."
He cited the twin towers of David Childs' Time Warner building that opened on Columbus Circle, next to Central Park, last year. The condominium apartments in the south tower have the address of One Central Park, and those in the North tower are named The Residences at the Mandarin Oriental. The condominiums started at US$1.5 million each but go up to US$36 million each for the two penthouses. One 12,500 sq ft penthouse was reportedly sold to a London financier for US$45 million.
That does not beat the Duke Mansion, a Manhattan townhouse that is on the market for roughly US$50 million. Or the city's most expensive - the $70million penthouse at the Pierre Hotel.
"There was some concern about too many of these apartments being built, too many hotel conversions going on. That clearly hasn't been the case yet," Mr Heym said.
With the US dollar as weak as it is, one might think these apartments were being snapped up by overseas buyers daily. Not so.
"I think by definition in Manhattan, most sales are luxury sales, with the average apartment going for a million dollars now," Mr Henkles said. "Yet even with the low dollar compared to the pound and the euro, we haven't seen a huge influx of foreign buyers. It's a good question why we're not seeing more of them - particularly Europeans."
Wednesday, September 28, 2005