Pressure mounts on New York's luxury real estate market

Sales of New York City’s most expensive apartments slowed sharply in the second half of last year, and brokers and analysts are not expecting a turnaround anytime soon in the new year as the prospect of an economic downturn makes it difficult for even the wealthiest homebuyers.

Bankers, traders and many in the financial services industry have traditionally used their bonuses as down payments, but Wall Street bank executives warn that this year’s payouts will be “more modest” after a slowdown in trading activity in 2022.

New York's luxury market ended 2022 with sales of $10.3 billion. Photo: WSJ.

“You have a low bonus season, high interest rates, and a bad stock market,” said Donna Olshan, president of Olshan Realty, which tracks luxury sales of $4 million and up. “That absolutely impacts spending and demand from luxury buyers.”

New York City’s luxury real estate market closed 2022 with a solid $10.3 billion in sales — from more than 1,300 homes priced at $4 million or more — and it was the sixth-best year in the past decade in terms of signed contracts, but 64% of those transactions occurred before the end of June, and activity slowed significantly in the second half of the year, Olshan said.

Brokers say rising interest rates will continue to be a major drag on luxury sales into 2023. Even wealthy buyers who buy with cash are being hit by the impact of high interest rates on financial markets, as many take money out of their investment portfolios to pay for property.

“Everyone has defaulted to some degree,” said Rachel King, a broker with real estate firm Serhant.

Some developers are offering concessions, including paying buyers mortgage interest for several years or paying regular fees for six months to close the deal, she said.

According to Ms. King, most of her wealthy clients are currently very cautious about buying real estate, unless they are forced to buy by life events such as a new job, marriage or divorce.

Lisa Chajet, a broker with Coldwell Banker Warburg, said concerns about the economy are scaring away buyers and as a result real estate prices in many places are cooling.

“A luxury client of mine just pulled out of a major project because he was worried that the U.S. would soon fall into recession,” Ms. Chajet said. “Some of these large apartments are selling for significantly less than asking price.”

While the outlook has slowed, New York City luxury real estate still outperformed cheaper apartments last year, with prices for the most expensive properties rising at twice the pace of the overall market, according to real estate appraiser Jonathan Miller, author of a market report for Douglas Elliman.

At $1.1 million, the median price for all properties in Manhattan (New York City) increased about 10.2% compared to 2019.

Even the top end of the Manhattan luxury market, typically the last to see price declines and the first to recover, is starting to slow, according to Garrett Derderian, director of market research at Serhant.

This “ultra-prime” luxury market, defined as properties selling for $10 million or more, fell about 12% in the second half of last year.

Many experts expect the first six months of 2023 to be quiet, but Mr. Derderian expects activity in the luxury real estate market to start picking up in the second half of this year.

Asian buyers, a group largely absent during the Covid-19 pandemic, who make up 30% of New York’s super-buyers, could “reappear” as Covid-19 restrictions in China ease.

Most of the remaining unsold projects have been “absorbed” by domestic, European and South American buyers during the pandemic.

However, Derderian said: “As of now, we do not have any oversupply or unsold projects on the market.

Le Na (According to WSJ)

Source: https://www.congluan.vn/2023-ap-luc-de-nang-len-thi-truong-bat-dong-san-cao-cap-new-york-post231834.html