May 1st 2011
The Real Deal
If there’s one thing that residential real estate experts agree on, it’s that there’s demand for new development condos in New York City. But that demand doesn’t mean that everything is hunky-dory in the new condo market again.
In this month’s Q & A, The Real Deal talked to new development brokers, heads of new development marketing companies and industry analysts about the strength of the new development market and the challenges that still exist.
They all said there are encouraging signs in the sector and exciting new projects — like the Stahl Organization’s Laureate on the Upper West Side and the Related Companies’ MiMa on 42nd Street — that could be bellwethers for the market.
But buying a new condo remains complicated for buyers.
For starters, even if a buyer is interested in a new condo, banks are still not jumping to issue them a mortgage. In fact, one source said that the disparity between getting a mortgage in a new condo and in a resale is still the biggest he’s seen in his 25-year career.
And while confidence is up, buyers are demanding more information, including details on the financial solvency of the project.
Meanwhile, though some condo projects, including several that stalled during the downturn, are logging strong sales, developers are still negotiating, albeit far less often than they were during the worst of the downturn (think more on the order of 6 percent than 25 percent).
For more on which buyers are in the market for new condos, how the strong luxury rental market is ironically helping convince banks to lend developers money to build more condos, and how FHA financing is helping move units, we turn to our panel of experts.
What kinds of buyers are looking at, and purchasing, new condos today?
We are seeing investors that are thinking they can get product at a discount and rent them out in a market that is still pretty active. If you buy your apartment at a steep enough discount [and] … you can actively rent that unit out, maybe even at a loss, it matters less because you sense that in a couple of years the market will come back.
What kinds of issues are buyers concerned about today that they weren’t concerned about last year when it comes to buying in a new building?
Who their neighbors are going to be. The one thing you didn’t have to worry about when the market was hot was that you wouldn’t have any neighbors. Now, in some new developments where the pace is slow, you don’t want to find yourself the loneliest buyer in town.
What is the most worrying trend in new development in New York today?
What concerns me is developers who are purchasing more out of speculation than true development intent. There is a speculative nature to some activity where people are trying to buy properties low and begin their career as a developer. We have backed away from a couple of them.
What new projects are you going to be watching in the coming months?
The Laureate on the Upper West Side. The Wilfs are developing 79th and Third. Toll Brothers has announced plans for a development on 65th and Lex. Also, I want to see how Lower Manhattan develops, and I’m curious to see how developers view the Upper Manhattan/Harlem market in the next five to 10 years.