Manhattan apartment prices suffered their worst drop in nearly a decade in the third quarter, with buyers staying away from multi-million dollar purchases as newly built luxury properties continued to flood the market.
Median prices fell 12% in the quarter from a year ago, the worst drop since the last three months of 2009, according to Core, a New York City real estate broker. The median price fell to $ 999,950, the first time it has fallen below $ 1 million in four years, according to data from Core.
The crisis is due in part to the introduction of a phased tax on residences at the end of the second quarter, brokers said, and the expectation of a further drop in prices. Sales also took longer to close, and a stack of inventory added to the glut.
“This is one of the biggest year-over-year declines I’ve seen,” said Garrett Derderian, general manager of market analysis at Core. “We’ve seen buyers take a virtual hiatus, especially for apartments over $ 3 million.”
Real estate developers have shown signs of concern, changing tactics for condominium and co-op apartments that need to be sold. Instead, they offered a few as rental units, split the penthouse suites into smaller apartments, and offered discounts in hopes of attracting reluctant buyers.
Extell Development, one of New York City’s largest real estate developers, recently began offering apartments for rent at its 815-unit One Manhattan Square condominium in the Lower East Side neighborhood. Tenants who buy their apartment will receive their annual rent on the purchase price.
Earlier this year, Extell offered to waive common charges for building buyers for a decade.
Other buildings, including One Hundred Barclay in Tribeca and a boutique development in West Chelsea, have followed suit, offering accommodation for rent, Mr Derderian said.
“The move to lease with the option to buy is the most troubling of the packages offered by developers,” said Mr. Derderian. “If you are renting with an option to buy, it’s because there are no buyers.
During the mortgage crisis of 2007 and 2008, some developers moved condominiums to luxury rentals in order to stem losses because no one was buying, but none have yet done so this cycle, he said. he declares.
Manhattan real estate prices have been dropping in recent years following the introduction of changes to the federal tax code, while rents have hit record highs in the city.
The total number of third-quarter sales was down 6 percent from the same period last year, while inventories were up 8 percent. Properties have spent an average of 192 days on the market, the longest since the last quarter of 2012, when apartments in Manhattan took 193 days to sell, according to Core.
Sales fell sharply to the bottom of the market, with contracts for condos and co-ops signed in the third quarter up 35% for properties costing less than $ 500,000, while contracts for apartments including the price exceeds $ 20 million fell 33%.
The mansions tax, which came into effect at the end of the second half of the year, is a tax on the purchase of housing that goes from 1% on properties valued over $ 1 million to 3.9% on units sold for over $ 25 million.