December 31st 2011
The Real Deal
In the wake of Sandy Weill’s reported $88 million sale of his 15 Central Park West penthouse, The Real Deal wanted to touch base and see if real estate executives had any last minute predictions for the New Year since speaking with the magazine for the December residential market report.
Dottie Herman, president of Prudential Douglas Elliman, and Frederick Peters, president of Warburg Realty Partnership, said to expect 2012 to be a bit of a repeat of 2011, while developer Donald Trump said “really good real estate will have excess value.” Elizabeth Stribling, president of Stribling & Associates, predicts a “continuing strong demand for new condominium offerings all over town,” while Stuart Saft, chairman of Dewey & LeBoeuf’s global real estate department, said “the euro will continue to be in trouble causing a flight to safety to the U.S. and particularly New York City, so New York City properties will trade at even lower cap rates.” Meanwhile, Citi Habitats President Gary Malin and Halstead Property Development Marketing President Stephen Kliegerman recently told amNY that 2012 would bring more development and fewer amenities to New York City’s real estate market.
Check out what the pros told The Real Deal:
Dottie Herman, president of Prudential Douglas Elliman
I expect 2012 to be a repeat of 2011, but perhaps a bit better, continuing the trend of sales on trophy and high-end properties. The middle market may be sluggish, not due to a lack of demand, but a lack of financing available.
Stuart Saft, chairman of Dewey & LeBoeuf’s global real estate department
Rents will continue to rise at a rate significantly greater than [the consumer price index] resulting in co-op and condo prices increasing by at least 10 percent. This renewed activity in the co-op and condo market will result in the [attorney general] receiving more than double the offering plans than it received in 2011. Moreover, because of continuing budget shortfalls, the real estate taxes charged on residential (and commercial) property will increase by more than 10 percent as will water and sewer charges. Interest rates on residential real estate, including multi-family, will continue at the present historically low rates through the end of the 2012 (i.e., after the presidential election) but will begin to rise after 2012, and the availability of mortgage financing will increase due to comfort with the New York City market for housing. Finally, the euro will continue to be in trouble causing a flight to safety to the U.S. and particularly New York City, so New York City properties will trade at even lower cap rates.
Judi Desiderio, CEO of Town and Country Real Estate in the Hamptons
I predict the blue chip properties will be of highest demand. Those are the estate areas [in the Hamptons] … and of course village and waterfront. The size of the homes [built and sold] will be smaller than in the recent past but the quality and amenities shall remain.
Lois Weiss, real estate columnist for the New York Post
Wealthy people are coming into town from all over the world and putting down cash on expensive apartments or buying extra apartments as investments or to save on hotel bills, keeping the luxury market moving at a brisk pace. But I think it will continue to be difficult for those who are the city’s middle class people to buy a two- to three-bedroom apartment in either Manhattan or the better areas of Queens and Brooklyn. Nevertheless, young families with kids want to remain in New York City with their friends and are doubling up their children in a bedroom to remain in the city. This is putting a big damper on sales in surrounding bedroom communities in the suburbs… Newer condo buildings are getting socked with taxes as abatements roll off so watch this year as political leaders will be lobbying hard to get co-ops and condos more property tax assessment increase protections which would push more of a tax burden onto multi-family rental buildings and commercial buildings.
Frederick Peters, president of Warburg Realty Partnership
My prediction for 2012 is that it will in many respects resemble 2011. I expect the Manhattan market to continue to demonstrate the same highly stratified and uncertain behavior which defined 2011: a) Big swings in confidence and therefore in activity, especially leading up to the election; b) Continued capital flight from the BRIC [or Brazil, Russia, India and China] countries bolstering the mid- and upper-ends of the condo market; c) A continued emphasis on turnkey condition to bring in top prices; d) A steady stream of deals in the $5 million and up category, with a diverse buyer population not entirely grounded in the finance industry e) Many apartments, especially in the older condos and in co-ops, lingering for months on the market as the sellers try to find an appropriate price f) Very tight rentals and maybe a resultant uptick in the smaller apartment marketplace as there will be little inexpensive rental product.
Adrienne Albert, CEO at the Marketing Directors
There is a fortune of money looking for a home on both sides of the development equation. Sites are already in play for both rental and for sale product. I believe this will escalate in 2012 resulting to a steady return of the development and construction industries. The New York rental market will continue to flourish. Rentals will stabilize if not continue to climb in value. New rentals are averaging over $80 per square foot and we believe that figure will be eclipsed in 2012. Because there is only six months of standing inventory in for-sale product, condominium prices will substantially escalate. Our for-sale market will continue to be fueled by the local New Yorker and supplemented by the foreign buyer throughout 2012. End loans will be more attainable also helping to fuel the demand side of the market. We believe the average per square foot in Manhattan will exceed $1,800 [for new condos] in 2012.
Donald Trump, president of the Trump Organization
Residential real estate will remain similar with a slight uptick, but the really good real estate will have excess value.
Elizabeth Stribling, president of Stribling & Associates
I am cautiously optimistic because demand is high, financing is easier and mortgage rates are low. High [rental prices may] prompt more people to buy, and foreigners [will] continue to favor the safe haven of the U.S. and the prime location of New York City. That said, concerns about global markets and economies and unemployment in the U.S. continue to contribute toward overall anxiety. Overall, New York City will continue to fare better than the rest of the country. I predict a continuing flat [and] steady real estate market in New York City with a continuing strong demand for new condominium offerings all over town.
Andrew Heiberger, founder and CEO at Town
On the Manhattan sales front, I believe that prices and price per foot in all parts of Tribeca, the far West Village, Noho and west of Park Avenue on the Upper East Side will rise the most due to a lack of supply. The same is true for townhouses and other single-family residences, where quality supply is also limited. Overall, I believe 2012 will see more sales transactions and slightly higher prices in Manhattan, with the market buoyed in part by interest rates remaining at historic lows during this upcoming election year. [In terms of the] new development sales market, I believe Gary Barnett’s One57 will be a grand slam and the success story of 2012. On the Manhattan rental front, the vacancy rate will remain low and rents are sure to rise starting around the second quarter. If I were renewing a lease right now I would try to extend for two years if given the choice, because once employment numbers pick up, rents will jump even further to record highs. Low mortgage rates are keeping rents in check because the alternative of buying becomes feasible once you approach the $80-per-square-foot threshold for units under $1.5 million.
Mitchell Rutter, president of Essex Capital Partners
In 2012 we are very optimistic about the continued growth of the rental market in Brooklyn and Queens, not withstanding anticipated layoffs in the finance and banking sectors. In Manhattan, the price-per-foot being paid for new rental projects leads us to question whether the projected rents necessary to justify these projects can be met in the short term. But over the long term, beyond 2012, the growing rarity of development sites means these projects too will be sustained.
Jonathan Miller, president and CEO at Miller Samuel
No significant economic policy initiatives to help economy/housing will come from Washington (it’s an election year). Mortgage rates will remain low with possible nominal uptick toward [the] end of year. U.S. unemployment will improve but remain above 8 percent. Credit will remain historically tight. Housing prices in the U.S. and New York City region will soften as foreclosure activity ramps up after the 2011 reprieve, a la “robo-signing” scandal. High-end housing will continue to outperform the balance of market. [The Federal Housing Administration] will need to be bailed out. A stronger dollar against the euro will temper foreign buyer demand in New York City.
Barbara Corcoran, founder of the Corcoran Group
This will be the year buyers get tired of waiting. And that alone will turn this whole market around. Get ready to rock and roll!