Even if rising mortgage rates are putting pressure on broader apartment sales and prices, a dearth of luxury apartments in Manhattan is driving up prices at the top of the market.
- ESSENTIAL POINTS
- Prices at the top of the market are rising in Manhattan due to a lack of high-end residences.
- According to Miller Samuel, the supply of luxury apartments—defined as the top 10% of the market by price—has decreased by 24% from pre-pandemic levels.
- While median prices in Manhattan have decreased overall over the past four quarters, they have grown in three of the last four quarters for luxury apartment.
Even if rising mortgage rates are putting pressure on broader apartment sales and prices, a dearth of luxury apartments in Manhattan is driving up prices at the top of the market. New data from Douglas Elliman and Miller Samuel shows that Manhattan apartment sales dropped 23% in the third quarter as buyers were pressured by rising mortgage rates. The median sales price for a Manhattan apartment was $1.15 million, while the average price was $1.96 million. Both values remained stable.
However, there has been a significant decrease in supply and a rise in prices at the upper end of the market. According to Miller Samuel, the supply of luxury apartments—defined as the top 10% of the market by price—has decreased by 24% from pre-pandemic levels. The third quarter saw the lowest level of available luxury apartments in five years.
High-end purchasers are often less susceptible to mortgage rates since they frequently pay in cash, according to Jonathan Miller, CEO of Miller Samuel. As a result, the wealthy have kept purchasing and benefiting from lower pricing.
However, since the epidemic, high-end sales have been mostly driven by newly constructed apartment complexes. Due to a scarcity of bank credit, the majority of those brand-new, expensive condos have now been sold, and few new projects are being developed.
“A lot of that new development inventory sold off during the pandemic boom,” Miller remarked. “New development sales are contributing much less to the higher end of the market.” Brokers believe that high-end condo prices could rise or hold steady as fewer new luxury condo projects are currently being built.
Serhant claims that nine Manhattan apartments priced at $20 million or more were sold in the third quarter, as opposed to just two during the same period in 2016. According to Miller Samuel, the median price for luxury apartments has risen in three of the last four quarters. In contrast, Manhattan’s overall median prices have decreased for four consecutive quarters. The top end of the market is certainly stronger than the entire market, according to Miller.
The average luxury apartment in Manhattan rent just hit a new record of $5,588 a month
The cost of renting in Manhattan increased in July as a result of rising interest rates and a lack of available housing. The average rent in July was $5,588, which is a new high and an increase of 9% from the previous year. According to a research by Miller Samuel and Douglas Elliman, the median rent, at $4,400 per month, also set a new high, as did the price per square foot, which came in at $84.74. Manhattan rents set a record for the fourth time in the previous five months.
Despite the pandemic’s population loss, Manhattan’s average rents are now 30% higher than they were in 2019. As families try to move before the start of the school year, August is often the month with the highest rental activity, according to Jonathan Miller, CEO of Miller Samuel, an assessment and research company. Miller predicted that there would be more record-breaking days.
The skyrocketing rents in Manhattan have persisted in defying analysts’ and economists’ projections. According to data from the U.S. Census, the borough’s population decreased by 400,000 between June 2020 and June 2022. Despite the fact that the population has grown since last year, experts believe it is still below 2019. Furthermore, thanks to remote work, Manhattan offices are still just about half full. At the end of July, New York offices were just 48% full, according to Kastle Systems.
Manhattan rents, however, are still rising despite the city’s declining population and increase in distant labor. Brokers claim that fewer flats are available for purchase because of increasing loan rates, forcing many prospective purchasers to rent. Since the outbreak, younger workers have also moved to the area.
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