Manhattan apartment prices reach record amid bidding wars

[NEW YORK] Manhattan apartment prices jumped to a record in the second quarter, pushed up by competition for a limited number of properties and strength in the luxury market.

The average sale price of all co-ops and condominiums was US$1.87 million, up 11 per cent from a year earlier and the highest in 26 years of data-keeping, according to a report Wednesday by appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. Resale apartments and units in new developments each set their own price records amid interest from both investors and buyers who intend to live in the homes.

"Demand is being driven by a vibrant local economy and rising employment, and supply is relatively inelastic," Jonathan Miller, president of New York-based Miller Samuel and a Bloomberg View contributor, said in an interview. "This has been building for the last year and a half." Buyers clamoring to own property in Manhattan found few choices on the market, pushing them into bidding wars, especially for resale apartments. Listings totaled 5,730 at the end of June. While that's up 1.3 per cent from a year earlier, the inventory is still 20 per cent below the 10-year average, according to Miller.

Resellers have been hesitant to list their homes because rising prices may leave them unable to trade up, Mr Miller said. At the same time, developers adding new units to the market have focused on building ultra-luxury towers aimed at billionaire investors as a way of recouping their high land costs.

The tight supply has forced buyers to stretch the limits of what they're willing to pay. Fifty-one per cent of all sales in the quarter were at or above their list price, the highest portion since the financial crisis, Mr Miller said. The average premium paid was 9.3 per cent.

"I've never seen more of a disconnect between what demand wants and what is financially possible to build," Mr Miller said. "We have an affordability crisis, not a housing crisis." The previous record average price for a Manhattan apartment was US$1.77 million, in the first quarter of 2014. The most- expensive homes have helped to push up that number, with the average price for luxury apartments, or the top 10 per cent of the market, surging 13 per cent in the second quarter to US$8.18 million.

The owners of a co-op at 360 W 20th St. sold the property last month for US$700,000 more than they were seeking after a bidding war broke out among 14 interested buyers, said Meris Blumstein, the Corcoran Group broker who sold the Chelsea property.

The sellers listed the renovated two-bedroom apartment near the High Line in March for US$2.5 million, the lowest they were willing to accept. A month later, the unit, which includes a 650-square-foot (60-square-meter) yard and temperature- controlled wine storage for 240 bottles, went into contract with a buyer who agreed to pay US$3.2 million.

Another seller in the neighborhood, Victor Vecchiariello, listed his West 23rd Street condo for US$999,000, and attracted several bids at an open house held on a snowy day in March. On the advice of his broker, Scott Harris of Brown Harris Stevens, Mr Vecchiariello held a second open house and ended up selling the 754-square-foot apartment for US$1.28 million.

One or two of the bidders "might have said, 'I'm going to step away,'" said Mr Vecchiariello, a partner in Ernst & Young LLP's tax division. "But most of them came back. They upped their offers a bit." Four other brokerages released reports Wednesday on the Manhattan market showing accelerating price gains in the face of limited inventory.

Brown Harris Stevens and its sister brokerage Halstead Property reported that resale apartments reached a record average price of US$1.57 million in the quarter, and a record median price of US$920,700.

Corcoran Group said Manhattan's median price and price per square foot reached the highest level in six years amid "supply shortages" of apartments for sale, particularly at less than US$2 million.

Compass said that lower priced listings - those under US$500,000 - are "quickly evaporating." Those units made up 11 per cent of the total market in the quarter, the lowest share ever. Apartments listed for US$3 million or more accounted for 30 per cent of the market, Compass said.

"These value listings are not being replenished," the brokerage said in its report.

In Upper Manhattan neighborhoods including Harlem, which traditionally have the borough's least-expensive listings, the median sale price jumped 8 per cent from a year earlier to a record US$583,000, according to Compass.

On the Upper East Side, the median price of a resale co-op was US$875,000, up 3 per cent from last year's second quarter, Corcoran said in its report. Previously owned condos in the area sold for a median of US$1.52 million, a 13 per cent increase. Units in new developments sold for a median of US$7.33 million, an 84 per cent jump.

Downtown - south of 34th Street through Tribeca - co-ops resold for a median of US$795,000 in the quarter, up 9 per cent from a year earlier, Corcoran said. Resale condo prices also climbed 9 per cent, to a median of US$2.02 million.

BLOOMBERG