Why Is New York Condo Crash Proof?
- Sep 07, 2007
This year has not been a good one for most U.S. residential construction markets.
Kansas new home projects were 50 percent lower in June than they were a year ago. In Ohio’s Dayton area, residential contracts dropped by 38 percent in July.
Northwest Arkansas saw a drop in residential building permits in the second quarter of 2007 — 56 percent less than in 2006, according to the Arkansas Business.
Yet, as different parts of the country report weakening housing markets, news of New York’s strong residential sales continues to spread.
New York City will reach its highest construction spending mark in years by racking up $24.6 billion in construction spending in 2007, according to New York Construction.
Take, for instance, Harlem, which is one of New York’s growing neighborhoods. Seven years ago, Harlem was undergoing a rebirth — new stores, properties and businesses like Old Navy moved in.
But the residential market was rising even faster. Roughly 4,300 free-market condos have been developed since 2000; 1,600 units are planned for this year, according to the New York Sun.
And they’re getting pricey: The average price per square foot for central and east Harlem condominiums rose 39.5% between 2005 and 2006, the biggest increase for any neighborhood in Manhattan, according to a recent study by the appraisal firm Miller Samuels.
"New York’s condominium market continues to be cited as the exception to the rule in terms of national housing markets," the managing partner at Massey Knakal Realty Services, Shimon Shkury, told the Sun.
So what gives?
- Limited space means unlimited demand. New York is, after all, an island. There’s only so much room, and there is a large supply of people who want to live there — which has resulted in low vacancy rates.
As such, the rents have increased between 2002 and 2005. The number of unsubsidized apartments, including rent-regulated apartments, renting for $1,000 and $1,200 a month rose by 58,000, or nearly 34 percent; the number renting for $1,200 to $1,400 rose by 57,500, or 52 percent, according to the New York Times.
- The high-end market in the country’s biggest city always holds some attraction. As mentioned in Wednesday’s blog, units near Central Park — long considered one of the premier addresses in the Big Apple — are selling for record amounts of more than $3,000 per square foot.
- With rents increasing, buying makes more sense. "Many renters found market rate rent increases so substantial that their preference in the ‘rent-or-buy dilemma’ quickly changed to buy," Shkury told the Sun.
New York is a unique place to live — and, as such, a unique residential market. As such, condo sales are strong.
But for many of the same reasons — escalating prices, low vacancy rates — renters can be left out in the cold. (Sometimes literally.)
Curious about how renters are faring in this rah-rah residential environment? Check the Out and About blog on Monday for part two of our look at the New York residential market.