Monday, December 30, 2013
Buying Apartment In New York in 2014?
2013 has been a banner year for Manhattan condos. Price per square foot is at a record $1,400, there has been a shortage of inventory and yes, prices are way above the prior peak.
Price records were shattered, for example, when hedge fund investor Bill Ackman and a group of investors paid more than $90 million for a unit at Extell's One 57. This shows even the top hedge fund guys know about the incredible performance of Manhattan condos.
Key trends to look out for in 2014, according to The Real Deal magazine, include interest rate increases, the new mayor Bill de Blasio, Midtown East rezoning, the new wave of condominiums coming on the market and redevelopment of the South Street Seaport.
Speculation that the Fed is winding down the easy-money program has resulted in buyers having the urgency to buy now to take advantage of still historically low rates. Some predict that rates could be as high as 6 percent a year from now.
Meanwhile, others argue that unless the economy picks up significantly, it's unlikely interest rates would be allowed to rise too much.
Bill de Blasio
Real estate watchers are anticipating changes that would come with NYC's new mayor Bill de Blasio. For example, many developments have tax advantages as they are being built with the 80/20 program where 20 percent are allocated as affordable housing units. The new administration may change the program ratio, for example to 70/30, which would change the financials of future development projects.
Midtown East Rezoning
The Bloomberg administration withdrew its proposal to rezone Midtown East last month. This would have eased restrictions on how air rights are traded, effectively allowing developers to increase the height and bulk of office towers between 42nd and 57th streets and Madison and Third avenues.
Bloomberg cited a lack of City Council support as critics argue that NYC was undercharging developers for air rights. Bloomberg first proposed the rezoning in 2012 and said it would have provided the area with hundreds of millions of dollars in badly needed subway and street improvements and $1 billion in tax revenue.
The rezoning effort is now up to the de Blasio administration and the real estate industry is watching closely.
New Wave Of Condos
This new wave of condo developments, most of which are set for completion in 2015, is priced higher at an average of $2,500 a square foot. This is driven by higher acquisition cost of land which has soared to around $800 a square foot. To return a profit, developers would have to price the units much higher. For the buyer, these new developments also do not have a tax abatement.
Developers are bench marking against high end projects like 432 Park Avenue and One 57 which are priced at $6,000 a square foot.
Some of these new developments include Greenwich Lane in the West Village, 10 Madison Square West in Nomad and 11 North Moore in Tribeca.
Redevelopment of the South Street Seaport
The Texas based Howard Hughes Corporation has broken ground on a new $200 million, 300,000 square foot retail complex at Pier 17. The multi-level glass building would have a rooftop event space and targeted at the local New York customer.
The Seaport would be competing for high end tenants with Brookfield Place which is the new World Financial Center to the west. Asking rents are expected to be between $200 to $350 a foot which is substantially lower than the World Trade Center which is asking $500 a foot.
Wei Min Tan is a Manhattan, New York condominium specialist focusing on investors and foreign buyers. He is frequently interviewed by top media outlets such as CNN, The New York Times and The Wall Street Journal and can be reached at email@example.com