The New York luxury housing market is back
Prices have eased, some new developments are giving shoppers options, and borrowing costs have started to stabilise, even if they remain high.
NEW York City’s moneyed elite circled the luxury real estate market the past couple of years, waiting for the right moment to splurge. That time has come.
“There was a combination of market forces that were so powerful, they woke the market up from its slumber, with buyers sprinting from the sidelines,” said Kelly Mack, president of brokerage Corcoran Sunshine Marketing Group.
The market has started to tilt in buyers’ favour. Prices have eased, some new developments are giving shoppers options, and borrowing costs have started to stabilise, even if they remain high.
For now, it’s bringing life back into the luxury market. A West Village townhouse that had been listed for a year was suddenly embroiled in a bidding war by November, according to Compass agent Jim St André. Sales rooms at three new condo projects built by developer Naftali Group have been bustling with appointments, even on Election Day.
The market for luxury home deals in November was the strongest its been in three years. There were 90 contracts to buy homes over US$5 million signed that month, making it the third-best November for those luxury sales in the past decade, according to brokerage Corcoran.
Rajiv Khanna, a partner at the law firm Norton Rose Fulbright, was one buyer lured off the sidelines in recent months. He had been considering buying a Manhattan townhouse since his employer started calling workers back to the office and an uptick in business made him feel more financially confident.
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In June, Khanna more earnestly kicked off a search for a brownstone, with a budget of as much as US$6 million. Prices had started dropping “within reason” and it was appearing more certain that the Federal Reserve would cut its benchmark rate in the coming months. He wanted to take advantage of the moment when rates remained high – a time when he expected to find more options within his price range and less competition.
By the end of July, he went into contract for a townhouse in Sutton Place, just a block from the East River. Khanna closed on the property in October for US$4.73 million, 4 per cent less than the list price.
Buyers such as Khanna forged ahead in recent months despite election uncertainty, which can often slow the housing market. While Khanna and his Corcoran agent, Etie Khan, discussed prices, interest rates and inventory, there was little talk of the election.
“Anybody who is going to be elected will change in four years. But you buy a house and stay in it for 20 years,” Khanna said. “In that time horizon, parties and presidents are going to change. So you can’t focus too much on one election.”
‘Perfect storm’
Shifting markets are helping to stoke the optimism. The S&P 500 has set new records in recent months. And the Fed’s cut in September ushered in speculation that rates have peaked. While many of the richest buyers often use cash to purchase homes, consumers wanting to finance deals have been stuck with high rates for more than two years.
“There’s so much wealth being created right now – the S&P is high, crypto is high,” said Clayton Orrigo, who co-founded Compass’ Hudson Advisory Team with Stephen Ferrara. “So you have big things trading and the upper end of the market’s really popping.”
More deals started to crop up too as developers have cut prices at buildings including the residential skyscraper Sutton Tower in Midtown East and Related Cos.’s luxury condo project at 35 Hudson Yards.
JVP Development, which worked on Sutton Tower with Gamma Real Estate, said it cut prices at certain units in the first quarter to meet a requirement for its offering plan to be effective.
“Since then, Sutton Tower has continued to enjoy strong sales – amongst the best-selling buildings in NYC – without additional price cuts,” said JVP Development’s Van Nguyen.
A number of new uptown projects in Manhattan hit the market and added more inventory. In the past month, the Henry and 255 East 77th St. – two projects by the Naftali Group – inked more than 21 deals at more than US$4 million. The Surrey Residences, a historic Art Deco hotel and residential building by the Reuben Brothers, sold 13 of its 14 condos for prices up to US$28 million, in September and October.
“There was a perfect storm in the marketplace. We saw a flood of activity from people who thought rates and prices might be hitting their bottom,” said luxury broker Ryan Serhant. “You finally had people saying, ‘What am I waiting on? Am I going to wait when housing is more expensive? Nope, I’ll just pull the trigger now.’”
Sales at luxury new developments climbed 12 per cent this year through the last week of November, according to Donna Olshan, whose firm tracks sales of US$4 million or more. The broader luxury market was up just 6 per cent.
Buyers are demanding quality and “there’s not much inventory available,” said Miki Naftali, the founder of his eponymous development firm.
Penthouse sales
Competition is tough in certain neighbourhoods. Buyers snapped up half of the 14 residences at the condo building at 140 Jane St in the West Village since September, including a penthouse asking US$45 million.
The recent uptick in New York’s luxury market may be more than a bump. The richest homebuyers could stand to benefit from Donald Trump’s victory in November, given how his tax cuts in 2017 played out.
Jonathan Miller, president of appraiser Miller Samuel Inc., expects “to see disproportionate growth in sales at the high end.”
Even top properties such as sprawling penthouses at 520 Park Ave. and 432 Park Ave. are starting to see a pickup. The penthouse at 432 Park Ave., first listed in 2021 at US$169 million, has struggled to sell, but listing agent Noble Black said interest is on the rise after the election. The unit is now listed for US$105 million.
Traffic for showings across all of Black’s team’s listings doubled in the last four weeks.
“A lot of the wealthy are planning on getting wealthier. They recognise they’ve received an economic gift,” said Black, a Douglas Elliman agent. “I think we’re going to return to the 1980s era of ostentatious wealth and conspicuous consumption. Real estate properties are how they show that off.” BLOOMBERG
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