Diane M. Ramirez
Chief Executive Officer
The Manhattan real estate market got off to a robust start in the first three months of the year, as signed contracts for ultraluxury apartments in new developments began to close, many with multimillion-dollar price tags, according to reports to be released by major brokerages on Tuesday.
The flurry of activity at the top pushed the number of sales to a seven-year high for the quarter and sent the average price per square foot soaring to a record $1,363, according to a report by the Douglas Elliman brokerage firm. Low inventory, high demand and a shift toward larger units in new luxury developments contributed to higher prices. The median price of a condominium jumped 13.4 percent during the first quarter from the same period last year, setting a record at $1,355,000, according to the Elliman report.
“This is the first time that we’ve seen this spike in price,” said Diane M. Ramirez, the chief executive of Halstead Property, which reported that the average price for an apartment in Manhattan set a record at $1,715,741 during the first quarter, up 30 percent compared with a year ago.
Over the past year, she said, “prices have been going up at a relatively moderate pace,” but the lack of inventory and high demand meant a significant uptick was imminent. “You knew it was coming,” she said.
Such robust price gains are “slightly exaggerated” when compared with the relatively weak first quarter of 2013, which saw a lull after a rush of high-end closings at the end of 2012 by buyers seeking to avoid impending tax changes, said Jonathan J. Miller, the author of Elliman’s report and the president of the appraisal firm Miller Samuel.
Even so, “the chronic lack of inventory of the last several years is finally beginning to impact pricing,” Mr. Miller said.
Over all, the median sales price rose 18.5 percent to $972,428 in the first quarter compared with the same time last year, which is about 5 percent below the 2008 peak.
Brokers expect those numbers to continue to climb. “You won’t have 18 percent price jumps every month — that’s not sustainable,” said Dottie Herman, the chief executive of Douglas Elliman. But the median price will rise, she projected. “I expect it to be caught up 100 percent by midyear,” and then slightly surpass the height of the market in 2008, she said.
While new developments represented less than 20 percent of market-wide closings, they drove some of the biggest price increases. The average price of a condo jumped 35 percent in the first quarter compared with the same period last year to set a record of $2,368,077, skewed largely by the sale of two penthouses, according to reports by Halstead and Brown Harris Stevens. In January, a $50.912 million penthouse closed at Walker Tower in Chelsea. And last month the media mogul Rupert Murdoch purchased a $43.01 million triplex penthouse atop One Madison on the southeast side of Madison Square Park. The mega-sales are expected to continue as contracts for apartments exceeding $90 million apiece at premium developments like 432 Park Avenue and One57 turn into done deals.
Such headline-grabbing sales tend to have a covetous effect on sellers at all levels, brokers say. “They see this and say my apartment is worth more,” said Hall F. Willkie, president of Brown Harris Stevens. But while a $90 million condo sale may help boost overall confidence in the market, he said, it “does not have a direct impact on a two-bedroom Park Avenue apartment or something on East 85th Street.”
Inventory was still a challenge, with the number of available apartments either flat or down by as much as 17 percent in the first quarter compared with the same period last year, depending on the report.
It was the first quarter to show a decline in contracts signed after seven consecutive quarters of double-digit year-over-year gains, according to a report by the Corcoran Group. Despite the large increase in closings, signed contracts were down 24 percent to 2,654 for the first quarter compared with the same period last year, according to the report, which attributed the drop largely to low inventory with too few apartments to satisfy hungry buyers, particularly at affordable prices.
A lack of large new development buildings and the harsh winter weather were also a factor. “That combo of bad weather and low inventory had a pretty significant effect on signed contracts this quarter,” said Pamela Liebman, chief executive of the Corcoran Group, who said that some sellers opted to postpone open houses until spring to avoid people traipsing through their apartments with snow-covered boots. That did not help ease the tight supply. “There are a lot of unsatisfied buyers out there hoping this spring will finally be the time they can find their home,” she said.
Tuesday, April 01, 2014