New York City’s Luxury Apartment Market Under Pressure in 2023
Sales of the city’s most expensive apartments slowed in the second half of last year, and brokers and analysts said they don’t expect a turnaround soon as the prospect of an economic slowdown pinches even the most affluent home buyers.
Bankers, traders and others in the financial-services industry historically have used their bonuses as down payments, but Wall Street bank executives are warning that this year’s payouts will be significantly smaller after deal making slumped in 2022.
“You have a low-bonus season, high interest rates and a deteriorating stock market,” said
Donna Olshan,
president of Olshan Realty, who tracks luxury sales of $4 million or higher. “That absolutely affects the luxury buyer.”
New York’s luxury market finished 2022 with a respectable $10.3 billion in sales from more than 1,300 apartments priced $4 million and above, according to Ms. Olshan. The year ranked fifth over the past decade in terms of contracts signed, but 64% of those transactions occurred before the end of June, with activity slowing significantly over the last six months.
Rising interest rates will continue to be a major impediment to luxury sales in 2023, brokers said. Even wealthy buyers who purchase in cash are affected by high interest rates’ impact on financial markets, since many pull money out of their portfolios to pay for real estate.
“Everybody, across the board, has lost affordability to some degree,” said
Rachel King,
a broker with the real-estate firm Serhant.
Some developers are offering concessions, she added, including paying down buyers’ mortgage-interest rates for several years or covering common charges for six months to close deals.
Ms. King said most of her luxury clients today are sitting on the sidelines unless they need to buy because of life events, such as new jobs, marriages or divorces.
Lisa Chajet,
a broker with Coldwell Banker Warburg, said concerns about the economy are spooking buyers, and prices are dropping as a result.
“I just had a luxury buyer pull out of something very large because he was nervous that there was going to be a recession,” Ms. Chajet said. “Some of these large condos are selling significantly below the asking price.”
The median price for all residential properties in Manhattan was up 10.2% from 2019.
Photo:
Ted Shaffrey/Associated Press
While slowing, New York City’s luxury real estate still outperformed less expensive apartments last year, with prices for the most expensive properties growing at twice the rate of the overall market, according to real-estate appraiser
Jonathan Miller,
author of the market report for Douglas Elliman. And at $1.1 million, the median price for all properties in Manhattan was up 10.2% from 2019.
Even the highest end of Manhattan’s luxury market, which is usually the last segment to see prices fall and the first to recover, has started slowing, according to
Garrett Derderian,
director of market research at Serhant. This “super-prime” luxury market, defined as properties selling for $10 million or more, saw discounts of about 12% in the second half of last year.
Mr. Derderian said the first six months of 2023 are likely to be quiet, but he expects activity in the luxury market to start picking up by the second half of the year.
Asian buyers, who have been largely absent during the pandemic and historically make up 30% of New York’s super-prime buyer pool, will likely re-emerge as Covid restrictions in China ease. And much of the unsold inventory on so-called Billionaires’ Row was absorbed during the pandemic by South American, European and domestic buyers, he said.
“We no longer have a glut of supply or unsold inventory in the market,” Mr. Derderian said. “That will, in turn, buoy prices and put a floor on how low prices will go.”
Write to Kate King at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Sales of the city’s most expensive apartments slowed in the second half of last year, and brokers and analysts said they don’t expect a turnaround soon as the prospect of an economic slowdown pinches even the most affluent home buyers.
Bankers, traders and others in the financial-services industry historically have used their bonuses as down payments, but Wall Street bank executives are warning that this year’s payouts will be significantly smaller after deal making slumped in 2022.
“You have a low-bonus season, high interest rates and a deteriorating stock market,” said
Donna Olshan,
president of Olshan Realty, who tracks luxury sales of $4 million or higher. “That absolutely affects the luxury buyer.”
New York’s luxury market finished 2022 with a respectable $10.3 billion in sales from more than 1,300 apartments priced $4 million and above, according to Ms. Olshan. The year ranked fifth over the past decade in terms of contracts signed, but 64% of those transactions occurred before the end of June, with activity slowing significantly over the last six months.
Rising interest rates will continue to be a major impediment to luxury sales in 2023, brokers said. Even wealthy buyers who purchase in cash are affected by high interest rates’ impact on financial markets, since many pull money out of their portfolios to pay for real estate.
“Everybody, across the board, has lost affordability to some degree,” said
Rachel King,
a broker with the real-estate firm Serhant.
Some developers are offering concessions, she added, including paying down buyers’ mortgage-interest rates for several years or covering common charges for six months to close deals.
Ms. King said most of her luxury clients today are sitting on the sidelines unless they need to buy because of life events, such as new jobs, marriages or divorces.
Lisa Chajet,
a broker with Coldwell Banker Warburg, said concerns about the economy are spooking buyers, and prices are dropping as a result.
“I just had a luxury buyer pull out of something very large because he was nervous that there was going to be a recession,” Ms. Chajet said. “Some of these large condos are selling significantly below the asking price.”
The median price for all residential properties in Manhattan was up 10.2% from 2019.
Photo:
Ted Shaffrey/Associated Press
While slowing, New York City’s luxury real estate still outperformed less expensive apartments last year, with prices for the most expensive properties growing at twice the rate of the overall market, according to real-estate appraiser
Jonathan Miller,
author of the market report for Douglas Elliman. And at $1.1 million, the median price for all properties in Manhattan was up 10.2% from 2019.
Even the highest end of Manhattan’s luxury market, which is usually the last segment to see prices fall and the first to recover, has started slowing, according to
Garrett Derderian,
director of market research at Serhant. This “super-prime” luxury market, defined as properties selling for $10 million or more, saw discounts of about 12% in the second half of last year.
Mr. Derderian said the first six months of 2023 are likely to be quiet, but he expects activity in the luxury market to start picking up by the second half of the year.
Asian buyers, who have been largely absent during the pandemic and historically make up 30% of New York’s super-prime buyer pool, will likely re-emerge as Covid restrictions in China ease. And much of the unsold inventory on so-called Billionaires’ Row was absorbed during the pandemic by South American, European and domestic buyers, he said.
“We no longer have a glut of supply or unsold inventory in the market,” Mr. Derderian said. “That will, in turn, buoy prices and put a floor on how low prices will go.”
Write to Kate King at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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