Millionaires and billionaires who use Manhattan real estate like a real-life game of Monopoly don’t always collect on their investments. In fact, luxury apartments are significantly more likely to sell at a loss than the average slice of New York real estate.
A StreetEasy study of Department of Finance records from 2014 to 2018 found that just 7.7 percent of the 16,000 homes that sold in the city in that period sold at a loss. When looking at just luxury condos in Midtown—like those at 432 Park Avenue, One57, the Time Warner Center, etc.—that statistic increases dramatically. Of the 66 luxury condos bought and resold in the neighborhood during that time, 39 percent of them were sold at a loss. While this is prevalent in Midtown, where a lot of the city’s new luxury construction is, it also happens across the rest of the city, too.
“In New York, real estate behaves like a luxury good,” Long told the New York Post. “It’s like fancy cars and expensive handbags. It’s purchased to make a statement. But it’s also highly cyclical and subject to whims.”
StreetEasy senior economist Grant Long has long cautioned against using ultra high-end Manhattan real estate as a money maker. “The fact is that for those looking for an investment rather than a home, a range of other financial opportunities offer greater income, a better historical track record, deeper liquidity, lower transaction costs, and far fewer headaches than buying a New York City apartment,” Grant wrote in a report released with StreetEasy in September 2018.
He continues on the same path with the new study. “One of the things that I struggle to wrap my head around is why people continue to park money in high-end New York real estate when it’s not a very lucrative asset class,” Long told the Post. “You just have to assume someone like Ken Griffin [the hedge fund billionaire who just purchased New York’s most expensive condo for $238 million at 220 Central Park South] isn’t very interested in seeing his money back. An apartment like that isn’t liquid.”
Of course buyers purchase luxury real estate and sell at a loss for different reasons: Some do to avoid taxes, and others to mitigate shared assets during a divorce. Then there’s the international buyers who buy luxury condos to hide money beyond the reach of their home governments. “Quite a bit of the luxury market was people trying to get money out of foreign countries and into bricks and mortar,” Donna Olshan of Olshan Realty told the Post. “Getting it out [of another country] was the goal, so a bit of a loss was no big deal.”
There’s also the matter of the luxury market peak, which saw an increased sales volume at higher prices. But as the city’s newest luxury towers came to completion and there was a glut of high-end condos, prices moved down putting anyone who purchased such a condo as an investment in a vulnerable place.
One such condo to sell at a loss is a 4,500-square-foot 62nd floor apartment at Extell’s One57. The apartment’s owner, an LLC called Escape From New York, purchased the palatial pad for $32 million in 2014 with the hopes of profiting from appreciating prices. But alas, the apartment sold for just $23.5 million in late 2016.