The thriving ultra-chic New York City real estate segment

What does seven million dollars get you? Access to the hottest New York City real estate segment; the ultra-high end market. 

This stratospheric sector is on a rockin’ roll with properties “selling for prices not seen since the headiest days of the boom”, The New York Times recently observed.  No flash-in-the-pan, this top-tier phenomenon has endured throughout the global financial downturn.

The latest example is the penthouse apartment at the super-chic One57 skyscraper. Initially listed at $90 million, the sprawling abode recently hiked its asking price to $115 million, as I noted in my last blog. The cheapest units in the luxe structure list for around seven million dollars, the figure at which an apartment graduates from there mere ‘lux’ designation to become ultra-luxury.

True to the age-old aphorism - “a rising tide lifts all boats” – top-of-the-line urban palaces have helped establish New York City as a strong and stable real estate haven in a global economy roiled by uncertainty. The promise of a solid return on a livable (and re-sellable and rentable) investment has lured scores of well-heeled foreign investors to the island. It’s also contributed to a general propping up of mid-priced condos which, at $3 to $5 million each, are also increasing their offering prices. In addition, several current reports point an increase in the number of new mortgage applications, accompanied by a decline in mortgage delinquencies.

In the midst of this scenario, Manhattan’s sky-high prices are fetching record-breaking sums, they’re also solidifying New York City’s reputation (at least, among the wealthiest New Yorkers) as a stable and solid investment site. As one real estate executive understated in the February 10^th Times article, “Most people would say that the top end of the market is bulletproof”.

But that still just the tip of the iceberg, in my opinion. The real benefit from all these new developments is reducible to a single word: confidence. People are beginning to believe the real estate market is headed for recovery.

With conviction comes power. Sheer faith in a real estate resurgence wields a strong-enough force to bring at least some laggard buyers back into the marketplace. They also lure reluctant sellers back. More people take action, prompting a virtuous cycle of sales of increased activity. And that, in turn, generates additional optimism. If we are convinced that feel good times are coming, our ‘as if’ behavior helps generate them.

So while we can’t really predict what will happen, we can look at some basic facts and take heart. And they go like this: Manhattan is among the most desirable places on earth. And its still a small, fully occupied space. With about 22 square miles of land (13.4 miles long and 2.3 miles across at its widest point), real estate on the island really represents a limited time offer, and a rare coveted gem – whether you’re buying thousands of square feet of penthouse views, or a cute little pied a terre.

Who needs gold when you’ve got Manhattan?

10-year assessment of New York City’s property market

Manhattan real estate: Still reaching for the sky

Consider it a towering vote of confidence.

Buyers are snapping up the pricey dwellings at One57, the 90-story apartment building (and hotel) rising above west 57^th street.

Almost a third of these ‘trophy apartments’ have already been sold or are under contract, despite the fact that it’s still 18 months from completion. If the nearly structure’s 11,000-square foot, six bedroom penthouse fetches anywhere near its $115 million dollar asking price, it will be the most expensive New York City apartment sale ever.

Most expensive apartment sale

Nearby, at 15 Central Park West, another recent sale holds the current record. After a mere three weeks on the market, the tower’s $88 million dollar penthouse went to a Russian billionaire seeking a landing pad for daughter, a 22-year old student in Manhattan.

Those are just two of the many recent – and dramatic - signs of New York City’s robust real estate health. Another comes in "The Elliman Report: Manhattan Decade 2002-2011," a 10-year assessment of the city’s property market.

The probe reveals that New York apartment prices increased almost 89 per cent since 2002. Last year, 10,161 properties changed hands, establishing 2011 as the third busiest year real estate sales year of the decade. The 2011 sales represented the most transactions since the 2008 credit crunch. In addition, the listing discount – the difference between the asking and the final sales price - was down to 4.3%, well under the 7.1% of 2010.  

True, the average Manhattan apartment remained on the market 127 days in 2011, eight days longer than during the previous year. But that’s just one day beyond the average market days for 2002.

A solid market

It’s no surprise, then, that the report finds Manhattan real estate remarkably stable “even in the wake of the worst financial period”.

New York City property holds its value, recession or not.

Foreign buyers don’t need to be convinced of that. Roughly 20 per cent of the property deals tracked by Elliman during the first decade of the 21^st Century involved purchasers from outside the United States. These savvy shoppers already knew what their American counterparts are now rediscovering; that few investments can offer both a solid nine per cent return, and a great place to hang your hat.

All this has would-be buyer wondering: Will $115 million for a penthouse apartment with double-height windows and a sweeping Central Park vista look like a bargain in a few years?

Q4 2011 Manhattan RE Market Report. Welcome to 2012

Remember when ‘not so bad’ didn’t seem like a positive? Welcome to 2012.

The New Year brings some pretty good New York City real estate news, and some same old not-so-great stuff. Long story short: while things are generally picking up, the recovery’s pace is maddeningly slow.

That’s the take-away from the Fourth Quarter Manhattan Real Estate Sales summary from Prudential Douglas Elliman. The report documents a modest increase in offering prices for properties in NYC when, as compared to the same period during 2010. Even better, sellers only had to shave 4.9 per cent off the original listing during the final days of 2011, an impressive change from the 8 percent drop they faced during the previous year. Overall, properties remained on the selling block for a mere five more days than in 2010.

At the same time, the number of New York City properties available for purchase is fairly steady, while apartments are becoming scarcer and pricier. Last year, Manhattan rents rose a staggering 9.5 per cent, driven by would-be homeowners who opted to sit out the uncertain economy.  The current numbers point to an equation that’s beginning to tip the argument back towards buying, rather than leasing.

Home orders up

Just last week, major national home builder Lennar Corp reported an astonishing 20 percent hike in orders for new houses 2010’s final months, an upturn nobody would have dared to forecast a year earlier. On Bloomberg.com, a company spokesman credited soaring rents for the climb. At the same time, the number of National Association of Home Builders Improving Markets nearly doubled from 41 to 76.

To be sure, problems are still aplenty. Chief among them – on the national level - is an inventory of well over a million homes in foreclosure with several million more bound for the auction block. Although a relative few are in Manhattan, it’s definitely not time to do a victory lap.

But for the discerning and dedicated New York City condo or coop buyer or seller, 2012 is starting to look downright viable. With the market quietly reawakening, plenty of bargains remain. Sellers, meanwhile, can expect to take a less painful hit while standing out amongst a diminished inventory of properties.

The key for those on both sides of a purchase is to proceed with care – and knowledge. Choose a capable broker, price the property well, offer a reasonable bid and be clear about your must-haves. Something is out there for everyone.

New York City Real Estate forecast for 2012

Ah, 2012. Mayan scholars predicted the world would end in December. Nostradamus pinpointed it as the year when a comet would collide with earth, causing Armageddon.

I’m far less pessimistic.

The upcoming year won’t end life as we know it, nor will it crush New York City’s real estate market. Rather, the recession-depression-downturn-stagnation-retrenchment of the American economy will, I believe, leave things looking a lot like they do today.

 Interest rates: Bizarrely low for the last few years, interest rates are likely to remain at rock bottom levels through 2012. The only possible change would be a slight increase.

Unemployment levels: New York City seems poised to hold on to its unfortunate place in the national unemployment picture. At present, the jobless rate hovers around 8.9 per cent in the five boroughs, well above the statewide average of 8.0 per cent. (The full statistical details are at: http://www.labor.ny.gov/stats/pressreleases/pruistat.shtm.)

Bonuses: With employers reluctant to add new positions in an unpredictable economy, bonuses won’t increase. Plus, the European Crisis and other global economic uncertainties keep wages at current levels. Read that: less money to spend on housing.

Inventory: With sellers hesitant to enter a market that may be near its absolute bottom, inventory is tight. I wouldn’t be surprised to see prices climb in 2012 as demand inevitably rises.

It may all sound dismal, but I see a silver lining.

New York City boasts a thriving rental market. With a vacancy rate of less than one per cent, sellers willing to lease their abodes while they wait for the rebound could do quite well.

Plus, high-end properties – listed for $5 million and above – are strong and healthy. After all, housing looks like a great investment when measured against other financial instruments. 

And, at some point, fence-sitting buyers will likely act on a hard, cold fact, that in 78 cities it is now cheaper to buy a house than to rent.

So 2012 doesn’t sound too horrible. Definitely not Armageddon.

Happy New Year.

RENTING the future, at Stuyvesant town

What’s the best way to own reasonably priced Manhattan property? Rent.

It’s not a riddle, it’s a reality -- or it could be, if a current downtown effort succeeds.

Just last weekend, the tenants of Stuyvesant Town/Peter Cooper Village – the biggest apartment complex in Manhattan – took another step towards ownership of the mammoth lower east side complex.  If their proposal succeeds  (as tenants are determined it will) the 56 buildings from 14th to 23rd streets could bring thousands of affordable condo or coops to the New York City real estate market, And with renters expected to qualify for attractive insider prices, the ‘village’ could become a good place to rent

But before all that, there are many – and big - hurdles to jump.

Public support

Public sentiment, potentially a big hurdle, is already on the side of the residents.   Such prominent leaders as U.S. senators, Charles Schumer and Kirsten Gillibrand are firmly behind the proposal. But the proposal faces numerous obstacles involving many stakeholders, as tenants determine how to structure the deal, set the prices, handle current renters, and, basically, make everyone involved reasonably happy. Brookfield Asset Management, the development’s financial backer, and CW Capital, which assumed control after the former owners defaulted in 2009,  are the most important players.

To understand the significance of this 80-acre slice of Manhattan real estate, you have to travel back in time, to the days when the blighted blocks of New York’s ‘gas house gang’ were an urban no-mans-land.

The beginnings

With WWII returning soldiers clamoring for housing, Robert Moses undertook a private-public partnership to the gas storage towers that gave the area its name. The construction of brand-new, multistory buildings immediately transformed the rough-and-tumble neighbor into a booming residential enclave dotted with parks and playgrounds. Coveted from the start, the property established long waiting lists, popularity that would endure for the next 50 years.

By the late 1990s, skyrocketing New York City housing values made the entire S/TC complex resemble low-hanging fruit for hungry developers. It took Tishman Speyer Properties LP and BlockRock Inc. to pluck it, acquiring the complex for $5.4 billion.

As it turned out, their timing couldn’t have been worse. Having bought at the very peak of the real estate market, sponsors found themselves unable to go thru with conversion. Many were offered for rent, prompting resident complaints about the ‘transients’ with no stake in the community. Owners were soon accused of improperly raising rents on long-term tenants.

Defeated, the owners finally defaulted putting Stuyvesant Town on the top of the CNNMoney’s  list of biggest commercial real estate busts in the nation. They left billions in debts that nearly decimated such investors as the California Public Employees’ Retirement System and the Church of England.

Tenants attempted to organize as buyers, but again the situation - a national economic disaster - made the timing wrong. 

This time, the stalwarts among the residents say they won’t let the plan fail. If they make good on their word, it will represent a very fitting milestone for a particularly historic slice of the Big Apple, Stuyvesant Town and Peter Cooper Village occupy the area where the last Dutch Director-General of the colony of New Netherland, Peter Stuyvesant, built his home – and started the whole New York City real estate thing.