Photo: Robert Clark
The overall New York City housing market may be “cooling” a bit, but luxury condos are still a solid investment.
NYC luxury real estate remains a better, more stable investment than the S&P 500 (an American stock market index based on the market capitalizations of 500 large companies) and crude oil, but trails behind the price of gold and the wealth of the world’s top billionaires, according to the 2018 CityRealty 100 released yesterday by the listing site CityRealty.com.
The CityRealty 100 is an index comprising the top 100 condominium buildings in Manhattan, which together indicate the overall strength of the New York City real estate market as an investment. Several factors, including a building’s sales history and prominence, are used to determine which buildings are included in the index.
The latest report tracks the performance of those buildings for the one-year period ending March 31, 2018.
After reaching all-time highs in both average prices and number of sales in 2017, the index’s values this year are more in line with prior years.
For example, the average price per square foot during the period covered by the report (April 2017 through March 2018) was $2,445, roughly matching average prices in 2016 and 2014. This was an annual decrease of 12 percent.
“Manhattan real estate, as viewed through the lens of this report, focusing on the top tier of buildings, is seen as a relatively stable and good investment,” writes CityRealty.com in the report.
The decrease in the average price compared to 2017 reflects a market that has, in recent years, been saturated with high-end and high-priced product, and is not “as frothy” as it was a year or two ago, says CityRealty.
“There are a number of extremely high-priced new developments under construction where closings have yet to be recorded and so it remains to be seen how quickly those units will be absorbed. It might be that we see longer sell-out times on very expensive new developments than we did three or four years ago,” CityRealty.com’s Director of Research Gabby Warshawer tells BuzzBuzzNews.
And 2019 will likely see the luxury market even out slightly as it recovers from the glut of high-end and high-priced product it has been saturated with in recent years.
Prices also fell in part because there were fewer closings recorded in very expensive newer developments — such as 432 Park Avenue and One57. The total number of transactions slipped 6 percent from the same period the prior year.
Meantime, over the last decade, the average price per square foot of properties in The CityRealty 100 index has increased at a Compound Annual Growth Rate (CAGR) of 0.7 percent per year (non-inflation adjusted) — higher than the 10-year CAGR for both oil (-5.1 percent) and the S&P 500 (-2 percent).
However, gold (3.2 percent) has experienced higher price growth than the buildings in the CityRealty 100 for the past few years, and over the past year the gap has grown wider given “the recent strength of the market for gold,” says CityRealty.com.
Similarly, the 10-year CAGR wealth of Forbes’ Top 100 Billionaires has grown by 5 percent.
Therefore, the buildings that comprise the CityRealty 100 index can be judged as a better, and more stable, investment than many other markets over the past decade.
But when it comes to investments, one thing remains clear — NYC real estate seems to be a fairly safe bet.
“There’s only so much of Manhattan island to go around, and New York is one of the top cities in the world for any number of industries. As long as that remains true, the real estate will continue to hold its value,” Warshawer says.
Click here to read the entire release.