The growth of the ultra-luxury residential market in New York City has seen developers looking to top each other with more and more opulence, from the sky-high towers of 57th Street to eye-popping prices in the West Village.
But lately, there have been signs that the price party might be over.
At a Douglas Elliman event last week that discussed international wealth trends, Elliman Howard Lorber told the audience that the supply isn’t outpacing the demand – it’s just often overpriced.
“There really is no over-supply except maybe at the very high end of the market, like 57th Street and Central Park,” said Lorber, dismissing the idea that there is a big glut in high-end product on the market.
Douglas Ellimanʼs Wealth Report found that by 2025, there will be 41 percent more ultra-high net worth individuals (UHNWI) in the world.
A UHNWI is considered someone with a net worth of over $30 million, excluding their primary residence.
Instead, Lorber argued, “The market for overpriced condos has slowed down.”
He said that “aspirational” pricing for the past few years was successful for a while, but isn’t working anymore.
“If you price something right, it sells relatively quickly,” he said.
Recent market reports have shown a slow-down in pricing among top tier Manhattan homes.
According to a StreetEasy report, Manhattan’s luxury market experienced seven months in a row of price decline, after peaking in May 2015, while the median time on the market extended to 131 days, due in large part to slowing condo sales.
“In New York City’s luxury tier, we’re already seeing prices decline,” said Alan Lightfeldt, data scientist with StreetEasy.
“As developers rushed to meet burgeoning global demand, luxury homes represented the vast majority of new product entering the market between 2014 and now. With demand beginning to wane, we’ve seen a considerable increase in the length of time that luxury units spend on the market – a reflection of oversupply at this end of the market – and prices among top-tier homes in Manhattan have actually declined each consecutive month since May 2015. “As the supply and demand for luxury homes readjusts, we expect that prices will continue to decline in 2016. Sellers will certainly need to adjust their expectations and asking prices this year.”
While it may have started with Extell’s One57 penthouse selling for $100.5 million last January, many others have since followed, and they aren’t just in Midtown.
The 7,600 s/f penthouse at One Madison in Flatiron is currently listed for $72 million, while the 9,700 s/f duplex penthouse at the Zeckendorf’s 50 United Nations Plaza is listed for $70 million, according to StreetEasy. In Battery Park City, a 19-room penthouse is listed for $75 million.
Developer Kevin Maloney of Property Markets Group made headlines when he changed the layout of the penthouse apartment at his new condo building at 10 Sullivan Street in SoHo, recreating the 8,400 s/f triplex unit into two separate apartments.
He decided to do this after realizing that the triplex, priced at $45 million, might not sell in the current luxury market.
Developer Bruce Eichner’s forthcoming Flatiron tower, a 65-story ultra-luxury residential building at 45 E. 22nd Street, is packed to the gills with amenities — the 83-unit building will have a half basketball court, a golf simulator, a gym designed by the guy who heads up 15 Central Park West’s fitness center, a library and lounge room that is a nod to the Nomad Hotel, and a 1,600 s/f “upper club” on the 54th floor.
Units at the tower start around $2.45 million for a one bedroom, and go up to between $8 million and $10 million for three bedroom apartments. The four-bedroom, six and-a-half bathroom penthouse is listed for $38 million.
In a recent interview with Real Estate Weekly, his confidence in his product outweighed worries about oversupply in the market.
“The market is clearly softening,” said Eichner. “What’s going to happen as a result of that, is that there are going to be winners and not winners. The buyers don’t disappear, what happens is, they have choices, and when they have choices and don’t have a sense of urgency, they will only go to something that they perceive has value.”
Another factor is the decrease in average bonuses given to Wall Street bankers, which fell nine percent in 2015, to an average of $146,200, according to a report just released by New York State Comptroller Thomas P. DiNapoli.
The agency attributed the decline in bonuses to the decline in profits on Wall Street, which dropped by 10.5 percent last year, to $14.3 billion. The average bonus in 2015 was the lowest since 2012, which averaged $142,860.
Those figures are important because many in the real estate industry have long said that Wall Street bonuses have an effect on the luxury market – whether it’s residential property or retail goods.
Though it remains to be seen if bonuses do in fact affect the luxury market, the trend of the super-rich parking their money in New York City is still going strong.
“There’s no better safe haven than here,” said Lorber of NYC.