For Sellers, High End Is Hot
By Marc Santora; Publishe in New York Times Feb 10, 2012
WHILE the economy remains stubbornly sluggish and home sales nationwide continue to sag, Manhattan’s real estate market has largely stabilized, with apartments in some neighborhoods selling for prices not seen since the headiest days of the boom.
Homes at two recent Robert A. M. Stern designs, 15 Central Park West, far left, and Superior Ink, are among the city’s most expensive.
But on the road to recovery, one segment of the market has outpaced the rest: ultraluxury, which analysts roughly define as properties costing $7 million and up. At these lofty heights, there was only the slightest of hiccups after the crash, and in the ensuing years, values have soared, with some apartments doubling in price.
Normally, that news would mean rising prices in every other segment of the market, from the tiniest starter studios to family-size four-bedroom co-ops. But that is not happening, even with interest rates at record lows and prices considered reasonable by Manhattan standards.
“There is a greater disconnect between the very top of the market and everything else than I have ever seen in my 25 years in the business,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel.
Part of the reason for this, brokers and analysts say, is that the wealthiest buyers are immune to practical matters like stricter lending standards and shrunken Wall Street bonuses.
In the last three years there has also been a dry spell in new construction, and for those with money to burn, the limited inventory has stoked demand. And with New York now seen as a refuge during uncertain times, international buyers are helping to drive the prices ever higher.
“Most people would say that the top end of the market is bulletproof,” said Pamela Liebman, the president of the Corcoran Group, “and that buyers at this end don’t have the same sensitivities as the rest of the market and their confidence does not wane. There is a reason that Hermès has a waiting list for belts and bags.”
Defining ultraluxury is not an exact science.
“When I started,” Mr. Miller said, “ ‘luxury’ meant the building had a doorman. Now, because luxury has become generic, they have had to add the adjective ultra.”
Generally, brokers agree that anything priced above $7 million fits the bill. Mr. Miller compared the sales at the top 5 percent of the market — apartments priced over $6 million — with those at the bottom 5 percent — apartments priced below $300,000 — over the last decade. After adjusting for inflation, he found that the value gap between the most and the least expensive properties has never been wider.
“It seems to be part of a wider global phenomenon, where there is an ever greater concentration of wealth at the upper echelons,” he said.
Many moderately priced properties sold last year for roughly the same price that they brought from 2006 to 2008. Mr. Miller described a one-bedroom at 360 East 72nd Street as typical. The owners paid $770,000 for it in 2006 and sold it last year for $750,000, about a 2 percent loss. Meanwhile, a four-bedroom at 151 East 58th Street, bought in 2005 for $13 million, sold five years later for $17.75 million, a 36 percent profit.
The most expensive apartments constitute only a fraction of the market, but the impact of their rising value is greater than just the eye-popping sums they command. Along with the surge in demand for lavish prewar co-ops, the success of developments like Superior Ink in Greenwich Village, and 15 Central Park West and the Laureate on the Upper West Side, makes it all the more likely that future developers will choose luxury over affordability.
In the 1980s, it was rental high-rises like those dotting the Upper East Side that appealed to developers. While they often offered some good-sized apartments, they were designed to accommodate as many apartments as possible. Operating under a different mindset, developers of those buildings often put fitness centers on the top floor, whereas that space now would be reserved for a penthouse getting top dollar.
The condos that have opened in the last few years often have larger apartments and fewer units. They are aimed squarely at the rich, perhaps none more so than the new Extell development at 157th West 57th Street, called One57.
When it opens next year, it will be the city’s tallest residential building, at 90 stories, and the most expensive, with the cheapest unit reportedly at $7 million. Fewer than 100 residences will be available.
New York has always had its share of trophy properties, but Ms. Liebman identified the $45 million sale in 2003 of an apartment in the Time Warner Center as the one that ushered prices into the stratosphere. Whereas eight-figure deals were a rarity as recently as five years ago, hardly a week went by last year without a sale over $10 million. The gilt-edged properties were spread across the city, including penthouses in TriBeCa and Union Square, co-ops on the East Side and new condos on the West Side.
When the banker Sanford I. Weill sold an apartment at 15 Central Park West late last year with an asking price of $88 million — more than $13,000 per square foot — real estate executives said the deal signaled another leap in the kinds of prices that are possible. Mr. Weill very likely doubled his 2007 investment of $43,687,751.
The impact was immediate. For instance the reported asking price for the penthouse at One57, first set at $90 million, soon neared $115 million. Still, at $7,000 per square foot, a certain kind of shopper might consider it a bargain.
“Even if you are spending $40 million, it is comforting to know that there are other people spending that kind of money as well,” said Kelly Kennedy Mack, the president of the Corcoran Sunshine Marketing Group, who has been a consultant to top-selling Manhattan developments including One57. ”