Property prices are falling in New York. Is now the time to buy?

The Times UK

Rents are also the lowest they have been for years and Manhattan is becoming more affordable, says H
Oct. 24, 2020


Living in New York is a fantasy for many, fuelled by popular culture (FriendsSex and the CityNew York, New YorkEmpire State of Mind). But the reality is not as glamorous. For one thing finding a decent apartment has become something of a blood sport. They are notoriously tiny, lacking in storage space, rare to come on the market and increasingly unaffordable for anyone but the rich — to rent or buy. The humourist David Sedaris once joked: “In other parts of the country people tried to stay together for the sake of the children. In New York they tried to work things out for the sake of the apartment.”

Out of the tragedy of the pandemic, however, something remarkable is happening: Manhattan is becoming more affordable.

Just ask Tim Powell, who works in sales for the Financial Times, and for eight years has paid $3,760 (£2,870) a month for a one-bedder in Gramercy Park, near Manhattan’s East Village. “My husband and I are both still employed, but we took a financial hit because of Covid. We have started looking on the Upper West Side. We have seen multiple flats for almost $1,000 less a month than we are paying, and most landlords are offering a free month’s rent. Central Park is so desirable, especially for us as we have a dog. We are finding deals we would never have dreamt of. As much as moving sucks, you can’t keep throwing that money away when you might be saving $10,000 a year.”

Buyers cannot believe their good fortune either. “It is an amazing time to buy property,” says Brian Meier, a broker at Christie’s International Real Estate, who describes a perfect storm in market conditions.

“We have an oversaturation of property on the market in Manhattan. Supply is up about 50 per cent since Covid started — we went from 5,400 homes on the market to nearly 11,000. Demand is down by 20 to 30 per cent. Foreign buyers, who are traditionally 20 to 25 per cent of our market, have dropped to nothing. Parents buying for children in school, that was 5 to 10 per cent, but that has completely dried up.

“And because the amenities like theatre are not here anymore, nobody wants a second home. People who were thinking of leaving the city in two or three years have sped up their plans. Not many speculative investors are willing to risk buying apartments when rental yields are flat or negative. So we are seeing fewer transactions, but more and more coming on the market.”

All of this adds up to a golden opportunity for buyers — particularly in the luxury market. “Between $5 million and $10 million that is where the deals are — we have seen reductions from 20 per cent to 40 per cent since before Covid. As you go down in value, the percentage decrease is less — between $2 million and $5 million you are down about 15 to 20 per cent. Between $1 million and $2 million you are down about 5 to 7 per cent. On top of all this, values are already down 15 per cent since the peak in 2017.”

Examples of eye-watering deals include a penthouse on 508 West 24th Street, purchased in 2017 for $9.5 million. “It is now on the market for $5.75 million, and I am told it can be purchased for $5.5 million,” Meier says. “One of the bigger stories is the penthouse at Walker Tower, on 212 West 18th Street. It was bought in 2014 for $51 million, by Khadem al Qubaisi [an Emirati businessman jailed for money laundering]. It recently closed at $18.25 million, although it did have to be sold very quickly. But there are a lot of these stories.”

So who are the buyers who are brave enough to splash out millions on property as we head into a second wave and an incendiary election?

According to Meier: “There are two main demographics. First, New Yorkers, people who are rooted here and in jobs. Lawyers and doctors. They know they are going to be here, and their income will not be affected by a recession. They are looking to upgrade.”

The other group of buyers are the daring speculative investors who are willing to forsake a decent rental yield in the current drought in the hope that they can buy cheap now and sell high in five years, a strategy that worked out well for investors after September 11 and the 2008 crash.

It might be a riskier bet this time. Richard Grossman, regional president of Brown Harris Stevens residential sales, says many potential buyers of high-end downtown condos are being scared away because New York may institute a “pied-a-terre” tax for second homes above a certain price point. “That is going to hurt a section of the market that already has too much supply. There are only so many billionaires who need this type of property.”

He says that Covid has allowed agents to have frank discussions with vendors who were asking too much before the pandemic set in. He recently sold an apartment in the Upper West Side for $4.7 million, down from the pre-Covid asking price of $5.2 million. But discounts all depend on the micromarket: in fashionable Brooklyn, with its brownstone townhouses and family-friendly parks, he says prices are only coming down 1 to 2 per cent; first-time buyers looking below $1 million might find it more difficult to secure a discount.

The number of contracts signed in Brooklyn rose 31 per cent in September, compared to 5 per cent in Manhattan, says Steven James, chief executive of Douglas Elliman New York, who says the real deals are in the elite, old-money Upper East Side, especially on fabled Park Avenue, where prices for apartments have dropped from $8 million to $5 million, or Central Park West, where apartment prices have been slashed from $3 million to “the low twos”.

James says that the good times will not last for ever, calling this “a window of opportunity” and predicting a rebound by the end of the year, but that depends on the spread of the virus. “We are already seeing certain zip codes being locked down.”

Powell may have a fabulous choice of rentals to look at, but he is not so optimistic about the city’s future. “I was here for September 11. That recovery was overnight. You had Broadway shows the next week, you had the governor encouraging people to go out and eat and shop. You could not say that now.

“All of a sudden the very reason everyone comes here and lives here has been taken away. There is no Broadway, no restaurants, no bars. It will take a successful vaccine before people will move back into that city. It is not the same place it was. It is heartbreaking. It is almost like we have been at war. It will take a long, long time to recover.”

Meier is more New York bullish, citing the city’s many falls and recoveries. In the 1970s the city was plagued by crime and hundreds of thousands deserted it for the suburbs, only to return en masse in the 1990s.

“When September 11 happened I was new and young in the industry. I was told no one is going back into the city, New York is done. A year after that we had one of the biggest booms we have ever seen. In 2008/09, after Lehman Brothers, we had too much inventory, but in 2010 we saw a seven-year boom like we have never seen before.
It is interesting and a little scary to see what will happen next. I am certain the buyers will be back.”

For brave buyers, now may be the time they can finally realise that elusive dream: a great New York apartment.

Was $29m
▼ now $26.5m

The joke about small New York apartments does not apply here. This five-bedroom condo in the Meatpacking District has 13 rooms, 5,444 sq ft, a 19ft x 21ft kitchen and a 120 sq ft outdoor terrace.

Was $1.49m
▼ now $1.38m

Built in 1961, 400 Central Park West is a prime Upper West Side address, with a 24-hour doorman, parking ($200 a month) and a Whole Foods nearby. This one-bedroom condo has 900 sq ft and a park-view balcony