This is probably going to blindside everyone, but it seems that developers are building more high-end luxury apartments than the market can probably sustain. Sure, it's fun to ogle the $130 million triplex pads of the city, but when it comes to the breadth of people who will dish-up to actually inhabit them? Turns out the population is probably pretty small. As the New York Times notes, the number of luxury apartments listed for sale in the third quarter in Manhattan over the past year doubled from last year's 742 to this year's 1,473, an increase of 98.5 percent. That's pretty bonkers, especially when said units are commanding prices of the eight-figure variety. "[N]obody really understands how deep the buyer pool runs" for ultra-luxury apartmentshomes asking more than $10 millionAndrew Gerringer of Marketing Directors, a firm who's helped to develop the high-end 50 West Street and 12 East 88th Street, told the Times.
Some see the surge in ultraluxury apartments as the beginning of a cycle in which potential buyers believe the supply of uber-expensive apartments is exceeding the demand and pull out of massive deals ahead of a speculated diminished resale values. Others believe the surge will lead developers to focus on building smaller mid-level, more attainable apartments. "What we think is the next wave of buyer is a guy who lives in Beijing but wants a one- or two-bedroom apartment, not a four- or five-bedroom apartment," like those in, say, 432 Park Avenue, developer Aby Rosen told the Times in response to his new project at 610 Lexington Avenue. While apartments in the building will still askcough$8 million to $10 million, it's less still than the ultraluxury towers of 57th Street.
For now, sales are still strong in the $10M+ department. 104 contracts were signed in September alone for apartments asking more than $4 million. Two apartments in Ian Schrager's 11-unit 215 Chrystie Street, which is priced at around $4,000 per square foot, have entered contract after just one week on the market. But there's no bet on how much longer this market will remain strong. "Real estate is always cyclical," Rosemary Scanlon of NYU's School of Professional Studies Schack Institute of Real Estate told the Times, "And what it sounds like we are seeing now is the next stage in the cycle."
· Luxury Condos: Dialing It Down [NYT]
· The 44 New Developments Hitting the Market This Fall [Curbed]