The low interest rates and foreign buying craze of the past few years led eager developers to build… a lot! Now, with interest rates creeping higher, new tax laws, and more hesitant foreign investors, inventory is surging ahead of demand in some neighborhoods.
The greatest oversupply, and commensurate sinking prices, has hit the luxury market (the top 10%), with prices off by around 15% from those originally projected. This has sparked a shift to ‘affordable luxury’ development (under $2,000/sq ft), which may end up simply shifting the oversupply.
Where is inventory piling up?
The neighborhoods with the greatest amount of new condos on, or coming on the market in the next year, are the Financial District, the Lower East Side, the East Village, and the Far West Side (Hudson Yards). Along Billionaire’s Row on 57th Street, new development is slowing as some early investors are seeking to cash out before their property is no longer hot.
Which neighborhoods are the exceptions?
Flatiron, Lenox Hill, and the Upper West Side all share a relatively low level of existing condo inventory and few new developments coming on the market in the near future, resulting in more stable prices and less sluggish sales.
The most balanced supply/demand markets for new condo sales are in the West Village and Greenwich Village, both having a high percentage of landmarked areas which preclude development. Also, properties that can be developed in these neighborhoods tend to be smaller, resulting in smaller projects.
What does this mean for the buyer?
The sense of urgency that has been in place for the past few years has dissipated. Buyer’s are feeling more relaxed about timing for putting in an offer, and more comfortable bidding under the asking price. This slowing has trickled down, to varying degrees, to all segments of the market, including co-ops.
Now is a good time to explore, as there is a lot out there to choose from, and developers are eager to make a deal. At Spark Realty, we can help navigate the many options and help you figure out whether this is the right time for you to get your slice of the apple.