Photo: Luca Sartoni/Flickr
At current sales and construction rates, real estate professionals expect New York City’s housing inventory to grow rapidly over the next couple years, especially for luxury condos.
According to a Miller Samuel analysis for The Real Deal, 14,500 units will hit the market between 2015 and 2017, but only 5,000 of the units are expected to sell by 2017. At current sales rates, excess inventory will not be sold for at least five years.
These predictions use sales figures from the second half of 2015, reporting just under 1,850 closed sales annually. That absorption rate means that more than 9,400 new units will be unsold at the end of 2017.
Many believe a contributing factor in the trend is the market need for more rental housing, not condos. Carl Weisbrod, head of the City Planning Commission, predicts more luxury condos will be brought to market than rental units due to the lapsed 421a tax break for developers offering affordable units in new buildings.
“The takeaway is that we have anywhere from four to six years of excess supply, assuming the rate of sales holds steady,” said Miller Samuel CEO Jonathan Miller in The Real Deal article. “…You’re not selling as much as is coming on. You can’t burn it off fast enough.”
Despite strong sales in recent quarters, most have predicted the overall sales market would cool this year, due to rising interest rates and weakening buyer confidence.
Real estate experts are not alarmist about the trend. A recent Forbes article says that New York is still a “hot ticket” for investors. China’s shaky economic outlook means that many foreign investors will be attracted to more stable US holdings, like real estate.
And Collier’s 2016 Global Investor Outlook says that New York real estate is a prime investment, with Manhattan commanding more than $4 billion in global capital in 2015. Twenty-four percent of overseas investors say they plan to invest in New York real estate this year.