(Bloomberg) -- The average price of a Manhattan apartment topped $2 million for the first time, reflecting the closing of deals from a high-end buying frenzy that’s now showing signs of a slowdown.
Buyers in the first quarter took ownership of condominiums in some of New York’s most-expensive developments after signing contracts as far back as three years ago, when construction was just starting on many of the buildings. The prices they agreed to are only now showing up in public records, skewing sales data in a way that masks the recent declining appetite for luxury homes, according to Jonathan Miller, president of appraiser Miller Samuel Inc.
“The flood of new-development closings represents a different time in the market,” Miller said in an interview. “It is not a testimonial to the current state of the market but rather a testimonial to an under-appreciated period in 2013 and 2014 when there was apparently a lot more activity than people realized.”
The average price of all Manhattan home purchases completed in the three months through March was $2.05 million, up 18 percent from a year earlier and the highest in data going back to 1989, according to a report Friday from Miller Samuel and brokerage Douglas Elliman Real Estate. The price per square foot of all co-ops and condos that changed hands in the period jumped 36 percent to $1,713 on average, also a record.
Those numbers were propelled by deals in new developments such as 432 Park Ave., on Midtown’s Billionaires’ Row, where a 65th-floor apartment sold last month for $26.6 million. Its buyer signed the contract in November 2012, New York City public records show.
Manhattan-wide, closed deals in new developments surged 94 percent in the first quarter from a year earlier to 621, Miller Samuel and Douglas Elliman said. The median price of those purchases jumped 60 percent to $2.6 million, the highest on record.
“The problem with the whole narrative is that in 2016, the closed-sales reports are going to look a whole lot better than the reality of the marketplace,” said Donna Olshan, president of brokerage Olshan Realty Inc., which publishes a weekly report on the luxury market. “It’s unfortunate because when you’re dealing with the stock market, you’re dealing with real-time data, but if you’re going to evaluate condo sales prices, you’re dealing with lagging information.”
The reality of the luxury market is more accurately portrayed by contracts signed recently rather than closed sales, according to Olshan. Buyers agreed to 218 deals for $4 million or more in the first quarter, down 29 percent from a year earlier, she said.
Manhattan’s four-year luxury construction boom has flooded the market with costly apartments, giving wealthy buyers more choices at a time when they’re more hesitant to make deals. Foreign buyers, who snapped up many of the most-expensive homes several years ago, are now being held back by the stronger U.S. dollar, lower oil prices and economic slowdowns in emerging markets such as China and Brazil.
Some builders are already girding themselves for a decline in luxury demand by delaying projects, reducing prices or even carving up planned apartments to make them appeal to a broader group of buyers.
Closings will probably continue to paint a rosy picture of the market for the rest of this year as buyers take possession of units in high-end developments such as 150 Charles St., 10 Madison Square West and 56 Leonard, the Jenga-like tower in Tribeca, Olshan said.
“Never before has there been such a disparity between the real conditions in the marketplace and the closed-sales prices,” she said.
Two more reports issued Friday also cited an average Manhattan-wide sale price that topped $2 million for the first time. Brown Harris Stevens and Halstead Property, in a joint report, said the number of new-development deals for more than $10 million reached a record in the first quarter. Corcoran Group reported the average sale price of newly built apartments rose 13 percent from a year earlier to $4.03 million.
Sales of previously owned apartments -- the bulk of the market, and accessible to a broader pool of buyers -- fell from a year earlier for the seventh consecutive quarter as there were too few apartments to satisfy demand, according to Miller. While the inventory of resale apartments climbed 20 percent to 4,663 units at the end of March, that’s still 10 percent less than the quarterly average for the past decade, he said.
Buyers of resale apartments in the first quarter paid 99 percent of the asking price on average, according to Brown Harris and Halstead. Previously owned units were on the market for 83 days, down from 86 days a year earlier.
The middle to lower end of the market is “still incredibly strong,” said Gregory Heym, chief economist for Terra Holdings LLC, who prepared the Halstead and Brown Harris report. “While we keep hearing about too many apartments on Billionaires’ Row, most developers aren’t making studios. It has this built-in limited supply.”
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