Since its inception, New York City’s high end real estate market has relied on the capital of wealthy investors. But with an economic recession on the horizon, investments have begun to slow and the market has suffered. It’s a good tip for investors to keep in mind; whenever you see an excess of NYC high end real estate listings, you would be wise to prepare for broad economic stress on the national level.
According to a recent survey from Street Easy, it may be time to begin preparing for just that. Investors should know, for the past six years, one in four luxury condos built remains vacant, and it will only get worse as swarms of units currently under construction begin to enter the market next year. To put it into perspective, since 2013, of the 16,000 luxury units built, at least 4,000 remain unsold. And with a housing affordability crisis in the headlines and homelessness at an all time high, New Yorkers are reasonably upset.
But just how unaffordable is luxury real estate, even considering the recent glut in listings? Well for starters, the citywide median price of $1.1 million is out of reach for most. Within Manhattan, new home buyers face a steeper median price of $2.3 million – even considering that 60% of new units remain unsold.
And on the Lower East Side, things look similar. The One Manhattan Square project for instance, despite extensive advertising, has only sold 21% of its 815 total units. Hudson Yards has also had trouble with their most recent tower, selling only 37.5% of units through August. Both projects ask anywhere from $1 million for a one bedroom unit to $15 million for a penthouse.
So how is this a sign of an economic slowdown? When investors are trying to keep their wallets shut, they’re less likely to splurge for expensive real estate. The price of housing could dropping significantly, and they’d rather not be stuck paying taxes on a long term investment during a recession. Instead, they opt for safer investments and modest homes; and the same holds true for renters in the $10,000 per month and up category.
So if you see an excess of luxury listings, know that investors sense an economic slowdown and are heading for the hills. When this happens, you would be wise to consider your options, and be wary of any property investments in the immediate future. Remember, the real estate market is cyclical, and when the recession comes and prices plummet, you’ll be glad you waited. For insight on making the most of real estate investment during a recession, stay tuned.
