Business is brisk in the residential realm.
With the City and its residents riding high on years of financial growth and stability, the residential market continues to reap double digit gains that have been a by-product of growing wealth and financial optimism.
Such sustained growth has, however, exacerbated or created new market conditions. With demand showing no signs of a slow down, a continued lack of new product on the marketplace is driving up costs, with most new residential buildings falling into rental or very high-end condominium categories.
For those with $700,000 and up (mostly way up) to spend, new super-luxury condominium developments scattered across the Upper West and Upper East Sides (as well as a smattering of renovations/conversions in TriBeCa) offer choices in larger, family-size residences, for which there has been no lessening in demand. Families seeking to purchase a minimum of two bedrooms in a cooperative or condominium in Manhattan that is not in the super-luxury category are still looking at average costs of a half a million dollars or more.
We are seeing an increasing number of first-time home-buyers invading the Manhattan marketplace. Many first-time buyers are being influenced by the advice of their accountants, the prevailing wisdom being that as expensive as it is to buy today, in the long run, with the financial opportunity to build equity and create tax deductions, it is still less expensive than renting.
There is, however, a fly in the ointment. Many new home-buyers are young newlyweds or professionals at the beginning of their careers, market segments in which parents often serve as guarantors for mortgage or maintenance payments. With so much demand for apartments vs. minimal supply, boards of directors, particularly those at high-end buildings, have become stricter about approving applicants who cannot prove - and prove in great depth that they can swing payments on their own.
There have always, of course, been boards which frowned upon parental cosigners, but, of late, the practice is gaining momentum. Whether growing board disinterest in parental guarantees ultimately affects the rapid growth of the new homebuyer segment, and whether a decline in new home-buyers will affect the entire market's health (according to statistics, more than 50 percent of home purchases in New York City are to this category of buyer), is a scenario to watch for fallout in '99.
At the moment, sellers and boards of directors can afford to be choosy, as those with savings, portfolios, salaries, bonuses and a property to sell in order to move up continue to pick up any slack.
The word that will define whether 1999 will be another year of across-the-board price increases and non-stop activity is "finite" - the finite number of sites available to build residential housing in Manhattan and the boroughs; the finite number of properties that can be feasibly and profitably renovated and converted; and the finite number of people who can actually afford and are willing to pay - the ever-upward asking prices of residential properties.
Emily Tannen, VP/Director of Sales & Marketing, A.J. Clarke Real Estate Corp.
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|Title Annotation:||Mid-Year Review and Forecast|
|Publication:||Real Estate Weekly|
|Date:||Jun 30, 1999|
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