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Manhattan housing market slows after years of record activity

Developers and sellers forced to readjust both prices and expectations in the absence of bidding wars

Overall, the average Manhattan apartment price slid nearly 5 per cent from 2017, to US$2.06 million from US$2.16 million, according to a year-end market report by CityRealty.

New York

MANHATTAN'S housing market sharply downshifted in 2018, especially at the high end and in new development, as rising inventory and other factors kept homes on the market longer and forced more sellers to readjust both prices and expectations.

But while brokers, developers and industry observers forecast more of the same for 2019, they aren't too concerned. The overall market remains healthy, they say, as does the local economy.

"The word of the year is reset," said Jonathan Miller, who runs the Miller Samuel appraisal firm in Manhattan. The past year was more of a "normalisation of the market," he said, after record activity in recent years, highlighted by New York City's single most expensive closing (for now), in early 2015: a US$100.5 million penthouse at the pinnacle of the One57 skyscraper.

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Pamela Liebman, the chief executive of the Corcoran Group, agreed with that assessment. "Since 2009, the market has gone on a very aggressive ride, and I think it's normal that we see a bit of a slowdown." Comparatively speaking, "sales are not low - they are just not unusually high," Mr Miller said. "It's like we came off the autobahn: It feels very slow relative to the last three to four years, but historically it's not." Indeed, the average price for a condominium in Manhattan has risen 58 per cent since 2008, according to CityRealty, which tracks unit sales, and the average price per square foot is 35 per cent higher.

During 2018, six apartment sales broke the US$50 million mark, and nearly three dozen more closed above US$25 million (although some were "legacy contracts," signed during construction when the market was stronger). "That's remarkable by any objective measure," said Daniel Levy, CityRealty's chief executive.

The year's biggest closings were two similarly configured duplexes at the just-opened 520 Park Ave tower on 60th Street. The priciest property sold for nearly US$74 million to James Dyson, the founder of the British home-electronics maker Dyson. The other duplex at 520 Park sold for US$62 million.

And downtown (which CityRealty defines as south of 30th Street) posted a record with the US$59 million sale of a penthouse at the new Getty building at 503 W 24th St, in Chelsea.

Brokers say demand continued at all price levels, if not quite as insistently at the super high-end. But largely absent were the bidding wars of recent years and the rushed purchases from floor plans. Many buyers became more discerning as inventory, particularly in new developments, expanded. Others were more hesitant because of higher mortgage rates (which hurt the starter market in particular) and uncertainty about the new tax law. By Mr Miller's account, there were 12 per cent more housing units for sale in Manhattan than there were in 2017.

As a result, developers have had to be more strategic to stay competitive. "You need to build in the right neighbourhood for the right buyers or offer something totally unique and in great demand," said Kenneth Horn, the founder of Alchemy Properties. He said sales at 250 W 81st St, one of several new projects, have gone especially well because "it was a new condo, and there are not many new condos in that area."

Individual sellers, however, were slower to adapt to the changing marketplace and saw their properties linger. As of the fourth quarter, it took an average of 152 days for a listing in Manhattan to go into contract, up from 101 days the same period in 2017, according to Garrett Derderian, the director of data and reporting for Stribling & Associates.

Overall, the average Manhattan apartment price slid nearly 5 per cent from 2017, to US$2.06 million from US$2.16 million, according to a year-end market report by CityRealty. (The drop would have been steeper without the pricey new-development sales.) Closed transactions for all condos and co-ops were projected to total 10,354, the report said, with sales reaching US$21.3 billion. That's down from the 13,295 transactions and US$25.7 billion in sales in 2017.

"The larger story is volume," Mr Levy said. "While it's down, it's not falling off a cliff."

Several luxury condominiums filled up in 2018, although the pace of sales and the average closing price declined significantly from the year before.

"Purchasers have more opportunities to select among many properties - they know they have choices, so they're taking their time," said Susan de França, the chief executive of Douglas Elliman Marketing.

Developers also had to contend with fewer international buyers, who in past years were active in the new-construction sector. Some foreign buyers now face tighter restrictions for moving money out of their home countries, particularly in China.

To help facilitate sales, developers were more willing to negotiate prices. "When the inventory level was tight, you would never hear the word 'negotiation' in the development market," Ms de França said.

Within the Corcoran Sunshine Marketing Group's portfolio of new developments, for instance, about three-quarters of the deals were negotiated, on average, for 7.4 per cent below the asking price, said Kelly Kennedy Mack, the group's president. Less common were purchases during early stages of construction (with the exception of the higher-profile buildings), she added.

Developers were also willing to offer more incentives, Ms de França said, absorbing some closing costs or adding in "a storage room or a wine cellar in the top of the market." In recent weeks, Extell Development even offered to pay three to five years of common charges for purchases made by year's end.

The CityRealty report projected that in 2018, 1,050 units would be sold in Manhattan's two dozen or so new developments, reaching US$5 billion in total sales - a drop from the 1,848 units and nearly US$9 billion in sales in 2017. The average price fell to US$4.54 million from US$4.79 million in 2017, and a record US$5.16 million in 2016.

Among the year's most active developments was 160 Leroy St in the West Village, where nearly all 57 residences sold. Its priciest sale was to Michael Rubin, the chief executive of the e-commerce company Kynetic. He bought a penthouse for US$43.5 million, which was below the $51 million list price. Also, One West End, on the Upper West Side near 60th Street, saw more than a quarter of its 246 units sell. Notable buyers included actor Bruce Willis and New York Yankees pitcher Aroldis Chapman; each acquired a four-bedroom for more than US$7 million.

While many top sales in 2018 were at new developments, there were several pricey closings at buildings that have been around for a while.

A penthouse on the 85th floor of One57, at 157 W 57th Street in midtown's Billionaire Row, sold for nearly US$54 million - although below its original US$70 million price from 2017.

For all of Manhattan, the average sale price for an existing condo unit fell to US$2.91 million from US$3.05 million in 2017, according to CityRealty's projections (although it's still more than US$1 million above the average 10 years ago).

"In some parts of the market, it is definitely a buyer's market," said Steven James, the chief executive of Douglas Elliman New York City. But he noted that sellers still have the upper hand in some neighbourhoods, particularly downtown. In the West Village and NoHo, for example, prices per square foot were up around 10 percent from a year ago, according to CityRealty. NYTIMES