April was a continuation of March for the NYC real estate market in terms of price and pace. March felt like the market woke up from the sleepy winter months of January and February. April was as busy as March. There was a constant stream of buyers out shopping, and there were plenty of potential sellers asking themselves if they should cash in on some gains. Both metrics: Number of Transactions and Dollar Volume of Sales have been on a downward trend over the last 12 months. But in March, Number of Transactions recovered back to a level last seen in July 2015, when the market was thought to be in a healthier state. Also recovered, but to a lesser degree, was $ Volume of Sales – only to last November’s level. These two numbers tell us that there are still many deals happening, but smaller deals. This supports the theme that the <2.5mm segment is very well supported and appreciating, but the high end continues to soften.
There is no doubt the NYC residential real estate market is under some pressure. Developers have started pulling the plugs on new construction condo projects, whose plans have been filed and approved. The good news is that many seasoned developers have a plan B for a slowing market. Chetrit, the developer who bought the Sony Building with a condo conversion in mind, ended up selling it as an office building to a Saudi investor at a premium. Witkoff, the developer behind the Park Lane Hotel, instead of converting it to a luxury condo, is renovating and preserving the hotel to protect income.
There are two more headwinds in play. The Chinese investors are having a much tougher time moving money overseas. The government tightened capital control and access to mortgage for overseas properties in recent months. However, from my seat, the stricter the domestic environment seems, the more inquiries I get from Chinese investors. In the short term transaction volumes have come down, while people digest and react to new measures. But in the long run, I see the Chinese demand growing stronger. The second headwind is the slowing rental market. Like the luxury condo market, the luxury rental market is soft. Rents are growing at the slowest pace in two years.