Manhattan’s Luxury Apartment Shortage Boosts Prices
A scarcity of luxury apartments in Manhattan is propelling prices to new heights within the upper echelons of the real estate market, even as the broader apartment sector faces challenges from rising mortgage rates.
Manhattan witnessed a 23% decline in apartment sales during the third quarter, primarily driven by the tightening grip of rising interest rates on potential buyers, according to recent data from Douglas Elliman and Miller Samuel. While median and average sales prices remained relatively stable, with the average Manhattan apartment priced at $1.96 million and the median at $1.15 million, the luxury segment has experienced a remarkable shift.
The supply of luxury apartments, categorized as the top 10% of the market by price, has plummeted by 24% when compared to pre-pandemic levels, as reported by Miller Samuel. This dwindling inventory of luxury apartments marked the lowest third-quarter figure seen in the last five years.
Jonathan Miller, CEO of Miller Samuel, noted that high-end buyers are often less affected by mortgage rates since they frequently make all-cash transactions. Consequently, affluent buyers have persisted in making purchases and capitalizing on more appealing pricing conditions.
Notably, the surge in high-end sales has been predominantly driven by newly constructed condominium towers in the wake of the Covid-19 pandemic. However, most of these new, high-priced condominiums have already been sold, and few new projects are commencing due to limited access to bank lending.
Miller explained, “A lot of that new development inventory sold off during the pandemic boom. The higher end of the market is seeing much less of a contribution from new development sales.” This situation is leading brokers to believe that high-end prices could either continue to ascend or remain robust with fewer new luxury condominium towers in the pipeline.
According to Serhant, the third quarter witnessed nine sales of Manhattan apartments priced at $20 million or more, a notable increase compared to the two sales recorded during the same period the previous year. Median prices for luxury apartments have displayed growth in three out of the past four quarters, in stark contrast to the overall median prices in Manhattan, which have experienced declines for four consecutive quarters.
Miller summarized the situation, noting, “There is clearly more strength at the higher end than the overall market.”