Remarkable Real Estate: THE STATE OF THE MARKET April 6, 2012 Elizabeth F. Stribling is the President of Stribling & Associates. Mover and Shaker Elizabeth Ann Stribling-Kivlan is the Executive Vice President, Director of Marketing & Business Development at Stribling. Elizabeth Ann has agreed to pose questions about today’s New York residential market to her mother.
The buzz in New York City has residential real estate going
through the roof. Has the high end really exploded?
Real estate columnists have had a field day with the
much-vaunted $88 million penthouse sale at 15 Central Park West from former
Citigroup CEO and Chairman Sandy Weill to the 22-year-old daughter of Russian
billionaire Dmitry Rybolovlev. This was a unique transaction. Supposedly, Miss
Rybolovlev will use the apartment when visiting New York while on break from
University.
I have heard that this sale has raised the bar for other
exceptional new condominiums with equally staggering views.
The words condominiums, new and exceptional are
key. Condominiums command an extra 15% to 20% in price over co-ops because of
flexibility of ownership and non-disclosure of financial assets; this serves to
attract the foreign buyer, whose attention is inevitably focused on the latest,
highest-profile conversions or new construction projects. But even in this
exceptional context, stupendous penthouses with terraces and views are rare. It
only takes one rich buyer. With this hope in mind, a terraced condo duplex at
50 Central Park South has recently been placed on the market for $77.5 million.
In the same vein, after the 15 CPW $88 million record sale, the Extell
Corporation raised the asking price of the duplex penthouse at 157 West 57th
Street, named One57, from $90 million to $115 million.
Tell me about One57. Can a new development across from Carnegie
Hall near Seventh Avenue really command such astonishing prices? Word has it
that the cheapest apartments begin at $7 million.
I was very skeptical until I visited the sales office and had a
personal presentation. When One57 opens next year, it will be the tallest
residential building in New York City, topping out at ninety stories with
sweeping views of Central Park, midtown, downtown and beyond the limits of the
city. However, it’s not just the views. The finishes are perhaps the highest
quality I have ever seen, and the layouts are brilliantly composed for today’s
living. The kitchens are enormous, with five-plus coats of lacquer on the
cabinets and the latest gleaming appliances. The bathrooms and accompanying
closets are as large as, or even larger than, the adjoining master
bedrooms—thus more resembling a custom house than an apartment. The $5,995,000
“starter” price tag for a two-bedroom apartment or the minimum asking price of
$9,750,000 for a three-bedroom condo at One57 only make sense with these facts
in mind. I was immediately sold on the apartments, but then I’m not writing the
check.
Who are buying these apartments? Are all these foreigners one
reads about really real? Where do they come from?
First of all, it’s not only foreigners who are buying expensive
condos. American corporate business leaders and entrepreneurs compose the
majority of the owners at the recently constructed and very popular condominium
at 15 CPW. Likewise, Americans purchased over 50% of the Private Residences in
the condo conversion of the Plaza Hotel. At a top-tier price point, many
demanding buyers want the latest and best new condo offering. Equally, more and
more foreigners are placing their money in the safe haven of New York
residential real estate. Yes, these foreigners are real, but over the years,
the countries just change. Today, more and more Brazilians are investing in
Manhattan condos. The Chinese buy condominiums for their university-bound
children. The English have recently gravitated to Williamsburg, while many
French are migrating to midtown; Russian oligarchs favor condo penthouses and
mansion-style townhouses.
Are these buyers looking for something specific?
They search for the very latest high-end fixtures and
appliances. Apartments must offer an elegant and effortless lifestyle. Large
apartments with a myriad of bedrooms are the most sought-after; how these
bedrooms will be used will differ from buyer to buyer. As a result, developers
are creating buildings with larger apartments and fewer units; the demand and
the return are clearly there for both buyer and seller.
What about the “average” buyer, if that is not an oxymoron in
the New York City marketplace. Where is the market now?
Most interestingly, the sale of studio and one-bedroom apartments
surged in the first quarter of 2012. According to the latest market report from
the firm of Miller Samuel, combined sales in these two categories accounted for
56.2% of all transactions. These are the strongest numbers in this sector since
2009, when first time buyers received a tax credit to take the plunge and
purchase a home. No doubt this current bubble of activity has been fueled by
low mortgage rates and a very strong rental market. Despite all the press
chronicling soaring luxury sales, this same report cites only seventeen sales
over $10 million in the first quarter of 2012, the same number as the last
quarter of 2011, versus twenty-five such sales in the third quarter of 2011 and
twenty-eight in the second quarter. That said, the luxury market is all about
availability, and numbers can be misleading. However—even with these recent,
super high-end transactions included in the mix—the average price according to
most market reports remained fairly steady in the first quarter of this year at
$1.48 million, up about 9% from a year ago, but below the $1.69 million at the
height of the market in early 2008.
It sounds as if there are contradictory messages in these latest
statistics. What’s your take?
I see a strong steady market, but not a market that is poised
for a rapid take-off upwards in overall prices. Demand is strong and quality
inventory is low. Weekend open houses are flooded with prospective buyers.
However, global economic uncertainty combined with low Wall Street bonuses and
an election year all serve to keep a lid on the market. Buyers in any price
range will only bid if a property is well priced and in excellent condition.
What areas of town command the most?
At the end of 2011, the most expensive areas by zip code were
led by Tribeca and Soho (10013) with an average price of $2,480,000. Greenwich
Village, Noho and Soho (10012) came next with an average of $2,450,000. This
was followed by the Upper East Side (10075) with an average of $2,359,000, and
the Upper West Side (10023) with an average of $2,182,000. Of course, these are
only averages, but they do reveal trends. Individual sales in all zip codes
vary widely according to building, condition, size and demand.
Where are today’s best values?
There are great values to be had in the East 50s and Sutton
Place. Equally, the grand buildings of East End Avenue offer incredible space
for the money versus Park and Fifth Avenues. Prime Brooklyn is no longer a
price alternative to Manhattan; it has become an established destination. As
Williamsburg and Greenpoint are becoming more and more expensive, the young
artists are heading to Stapleton in Staten Island, Upper Broadway and Queens.
Has the profile of the average buyer changed? Who’s buying
today?
New York City is no longer just a Wall Street town. Buyers come
from a much more diverse pool. There is a healthy mix of entrepreneurs and
professionals from the legal, medical and corporate worlds. Purchases by
bold-face celebrities from the arts and sport fields fill the gossip columns,
which chronicle sales all over town, from Greenwich Village to the Upper West
Side. In addition, there is a large group of purchasers from what is now called
“the connected class”, trendsetters from the technology, media, fashion and
design worlds. Finally, don’t forget the independent hedge fund guys and gals,
as well as affluent parents buying for their children.
With all the talk about condos, are co-ops going out of favor?
Heavens, no. The structure of the co-op with its demands of full
financial disclosure has kept our market stable and free of the foreclosures
that have plagued the overall national market. You must remember that 70% of
our housing market is composed of co-op apartments. Many buyers favor the co-op
structure that puts much emphasis on good neighbors with the references to
prove it. Also, if you want to live in a pre-war building on the Upper East or
West Side, the overwhelming majority of such buildings are co-operatives.
Interestingly, a co-op buyer can also be tempted by a glossy new condo, but a
condo buyer will most probably never buy a co-op.
How’s the townhouse market faring?
Townhouse living is more and more in demand but, once again, it
all depends on proper pricing. That said, in the last two years, there have
been two record sales of townhouses at $44 and
$48 million on the Upper
East Side. According to a recent survey by Miller Samuel, townhouse sales
accounted for only 2.3% of all Manhattan residential sales in 2011, but at the
same time, average prices nearly doubled in the last decade from $2.3 million
in 2002 to nearly $5 million in 2011. Townhouses not only offer privacy but
each individual house offers a totally unique personality and lifestyle.
If the demand to buy remains strong, what about the rental
market? Is it down by comparison?
Amazingly, no. In fact, the rental market has a record low
vacancy rate with no letup in sight. In 2012, there will be the least amount of
new rentals coming to market in the last seven years. In a still-uncertain
economy, many people choose to rent. This has driven the vacancy rate down to a
mere 1.27% and has prompted overall rents to rise. At present, the average rent
for a luxury one-bedroom apartment has reached just under $4,000 a month.
What’s your crystal ball predicting for 2012? What are the new
areas of town to bet on for future appreciation? How’s the year going to end?
I think we will experience a solid, steady year that will be
much like 2011. Demand will continue to be strong. Good inventory appears to be
on the rise, which should prompt increased sales if properly priced. However,
with the exception of the rare super-rich buyer who will pay up for a really
special property, most buyers—faced with global financial and political
upheaval and the upcoming national elections—will remain cautious in their
bidding. This will keep a lid on escalating prices.
Development sales will continue to flourish, as the appetite for
the latest move-in condition condo remains unabated. Buyers will readily
consider new neighborhoods in order to find the view of their dreams or the
latest in trendsetting construction.
As far as neighborhoods, I’m betting on both the far West and
the far East Sides. On the West Side, I see the midtown blocks around the
former Penn Yards as finally prime for development. In addition, I’m bullish on
the downtown areas along the West Side Highway as the World Trade Center rises
in a revitalized neighborhood. On the Upper East Side, the neighborhood of the
East 70s and 80s between Second Avenue and York Avenue should become more
sought-after, as the completion of the Second Avenue subway willoffer the ease
of readily available transportation. As a result, I predict that more young
professionals and young families will look favorably upon this neighborhood.
You always appear optimistic!
I have never seen New York as vibrant as today. New York is more
than ever a destination city. There is a palpable excitement in the air as new
neighborhoods invent and reinvent themselves. More than ever, I’m betting on
this town.
