Luxury Developments Drive New Price Records In Manhattan

The Manhattan real estate market is starting to see the effects of the city's ultra luxury new developments. Market reports for the first quarter of 2014 were released at midnight, and thanks to a high volume of closings at the top end of the market, records were broken across the board. The Elliman report, prepared by appraiser Jonathan Miller, found that the average price per square foot reached its highest level in 25 years, clocking in at $1,363, a 23.6 percent jump from Q1 2013; the price per square foot also set new records in every category—condos, co-ops, new developments, and luxury developments. The average sale price also reached a new high, jumping 30 percent to more than $1.7 million, according to the Elliman and Brown Harris Stevens reports. However, the median sale price, Miller's preferred metric since it eliminates outliers, did not set a new record; it rose 18.5 percent to $972,428, but that's still below peak 2008 levels when it cracked $1 million.

Miller says we're experiencing a jump in prices because the past several years have seen chronic low supply and tight credit, plus there's been "a shift in the mix to higher end sales," including the record-setting $51 million Walker Tower penthouse and the beginning of closings at super luxe developments like One57. "Market share for new development was 16.1 percent of all closings," says Miller, "and is expected to grow over the year." Additionally, the higher end of the market is seeing more activity because "credit remains tight, actually tighter than 2013, because of Dodd Frank's qualified mortgage standard, so all cash buyers continue to drive the market."

Even still, Manhattan saw the most first quarter sales in seven years; there were 3,307 closings, up 34.6 percent from the same period last year. Inventory leveled off, with the supply holding steady after three years of consistent declines, but low inventory and heavy sales still contributed to rising prices. The median luxury development price rose 43 percent to more than $5.75 million, while the average price per square foot for new developments jumped 37.7 percent to $1,834.

Miller points out that while a lot of records were broken this quarter, the comparisons to the first quarter of 2013 are slightly exaggerated. "We are comparing an 'ok' quarter in Q1 2013 when confidence was low to a robust quarter now," he explains. "A year ago, we were just coming off the fiscal cliff, and when we went over it, for the first month or two people were waiting for the sky to fall, but by the end of the quarter, the market picked up." And if you recall, sales continued at a torrid pace throughout the rest of the year.

So what can we look forward to? With more closings to happen at high-end new developments likes One57—including that $90 million penthouse—we'll likely see even more new price records. This should be a fun.
· 1Q - Manhattan Sales report [Elliman]
· 2014 Q1 Manhattan report [StreetEasy]
· Market Reports [Brown Harris Stevens]
· All Market Reports coverage [Curbed]