The average sales price for a Manhattan apartment jumped by a 30.9 percent year over year while the average price per square foot increased by 23.6 percent year over year, according to a quarterly report compiled by appraisal firm Miller Samuel.
Rising prices can be attributed to the ongoing Manhattan inventory crisis, which has seen fewer than 5,000 apartments on the market at any given time over five consecutive quarters. Also contributing is a general upward pressure on new development pricing as the result of an overheated market for land. Competition between developers trying to secure new Manhattan sites has sent land prices above $800 per square foot in some instances, meaning developers have to reach for the skies on pricing to maintain profitability.
The average price in the first quarter of the year for a luxury apartment, classified as an apartment in the top 10 percent of co-ops and condos, was $2,706 per square foot, a 40.6 percent increase year over year and a 17 percent increase from the fourth quarter of 2013. To be in the top 10 percent, an apartment had to close for at least $3.72 million in the first quarter, up from $2.94 million in the same quarter of 2013.
But many experts say the overall market numbers, while undoubtedly strong, may be somewhat deceptive. That’s because the first quarter of 2013, with which comparisons are made, was particularly weak, coming directly after a frantic fourth quarter, which saw a rush of closings ahead of an expected rise in capital gains taxes.
Month-over-month increases paint a slightly less dramatic picture. Median prices by unit-type were up across the board in the first quarter. The median price for one-bedroom condos rose 12.5 percent from the year earlier, to $928,000, the data shows. The median prices for a studio and a four-bedroom also jumped by 7 percent and 20.4 percent, respectively, to $620,000 and $5.42 million. The average sales price for a co-op was up 41.5 percent year over year, to $1.49 million, and 27 percent from the fourth quarter of 2013.
Meanwhile, the inventory shortage shows no signs of letting up soon. While a rise in permit applications over the last three years may signal a jump in the number of units coming to market, those units likely won’t hit the market for some time and, even then, won’t be enough to meet demand. According to Miller Samuel, a permit filing means that you’re not going to see that project be marketable for at least a year or two, and then closing in two or two-and-a-half years. So, that’s really a commentary on what we’re going to see in the market in 2016. Meanwhile, listing inventory stayed steady year over year, rising by only 0.2 percent.