There is no doubt that the luxury residential market is soaring. According to Douglas Elliman, the average apartment sells for $2,166/SF, a 3.1% increase from 2010. Condos have sold for as high as $5,000/SF as seen at 15 Central Park West. The average apartment sales price was $5,621,335 over 201 sales in 4Q11.
The townhouse market is also thriving. In the past week we placed a townhouse under contract on West 10th Street for substantially over asking price. Although the property had three rent stabilized tenants, it will still trade for close to $10m. The buyer, who was on the Forbes 400 list, will close all equity.
We had the property on the market for just a matter of weeks. During this time we had dozens of tours, which ultimately lead to close to ten offers submitted. Clearly there are many high net worth buyers in this category.
Luxury residential buyers rarely use debt, even though rates are at all time lows. I believe many of these buyers, who are now adding third and fourth homes, are looking for a place to park their money, rather than leave it in cash.
Investing in blue chip neighborhoods have faired well over the last few years. For example, in Greenwich Village the average house sold for $1,411/SF in 2009, then $1,409/SF in 2010, and then $1,642/SF in 2011.
Finished houses are now routinely sold for over $3,000/SF in that neighborhood, as demonstrated by 20 East 10th Street which sold for $18,995,000 or $3,322/SF. Other examples include 23 Perry Street which sold for $11,650,000 or $3,351/SF and 40 West 10th Street which sold for $20,000,000 or $3,156/SF.
Speculators are taking note. Seeing how you can buy vacant townhouses in the $2,000/SF range, there is certainly enough of a spread. I am currently marketing 14 East 11th Street, a 21' wide townhouse. We're asking $8,950,000 or $1,646/SF.
The challenge for speculators is that conventional lenders won't finance. Private lenders are jumping into the space, providing loans for around 10% with loans to-project-costs at only 50-60%. That being said, it's tough for speculators to compete with the end users who will write a check.
With raw condos selling in the Village for as high as $5,000/SF, townhouses still seem like a great bet.
James P. Nelson, Partner
James Nelson is a Partner at Massey Knakal Realty Services. Since 1998, he has been involved in the sale of more than 200 properties and loans with an aggregate value of over $1.3 billion in the NY Metro Area. He can be reached at firstname.lastname@example.org or 212-696-2500 x7710.
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