This week I took a look at the spread between Manhattan closings of new development and existing co-op/condo sales using average sales price. Over the past 18 months, the spread between these categories has widened considerably. When a lot of the new product currently entering the market begins to close over the next two years, I suspect the gap will jump since the starting point for most of the new product is currently north of $3 million (the upper limit of this chart).
Year to date in 2013 (Q1-Q3), the average differential between new development and existing average sales price was $753,195 or 86.6 percent above the $403,688 average of the same period within each year over the prior decade. This differential doesn't reflect the premium for like product in both categories since existing sales cover a significantly widely price range but it does show how quickly product type is changing.
The shift in new development towards luxury product has been widely discussed over the past 2-3 years, beginning with One57 (where a 1-bedroom starts at $3 million). As the luxury new development market moves towards higher supply over the next few years, perhaps we'll see land prices fall, making it once again feasible for developers to build something below the $3 million threshold en masse. Until then, don't look for more modestly (within context of Manhattan) priced new development to solve the inventory shortfall for the balance of the market.
· Miller Samuel [official]
· All Three Cents Worth [Curbed]