As Condo Sales Languish, Builders Slam 421-a Reform
The Sun has a couple of articles this morning that, taken together, seem slightly contradictory. First off, Mike Stoler writes about how condo sales at many new Brooklyn developments have seen better days. (AKA condo glut.) Developers say that many for-sale condos in Downtown, Dumbo and the Burg are seeing price cuts of 15 to…
The Sun has a couple of articles this morning that, taken together, seem slightly contradictory. First off, Mike Stoler writes about how condo sales at many new Brooklyn developments have seen better days. (AKA condo glut.) Developers say that many for-sale condos in Downtown, Dumbo and the Burg are seeing price cuts of 15 to 20 percent and that many Brooklyn builders are considering turning their projects rental. One unsourced industry leader has this to say: There has been massive overbuilding in the entire borough of Brooklyn. It is like the Wild West, and if you don’t control growth, then at some point it’s going to get out of hand.” The other story in the paper is about how developers are psyched that in December the City Council is going to review the changes to the 421-a program, which, effective in July, requires that projects in many sections of the city (including the Slope, Prospect Heights, and Bushwick) include 20 percent affordable housing in order to get 421-a tax abatements. In other words, while sales are at a standstill at many developments (a whole lot of which benefited from 421-a), developers want 421-a tax breaks reinstated in order to incentivize the construction of more market-rate housing. Yes, 421-a repeal would mean cost-savings for buyers in the future, but right now those buyers aren’t keen on plunking down money for all the condos we already have. So the question is, does is make sense to incentivize the creation of new housing at a time when the existing pipeline isn’t being absorbed? Or is there still plenty of need and demand for new housing, just not at these prices?
The Divide Between Manhattan, Other Boroughs [NY Sun]
Tax Abatement Debate To Be Revived [NY Sun]
“By the way – this very scenario happened in Harlem in the early 20th century. Developers built the entire neighborhood as luxury housing. The rich white buyers didn’t appear. So what happened? It went to poor blacks who previously were restricted to tenements ”
Covert racist statement alert! What evidence you have that this happen??!! This is a case you are taking out of your ass Polemicist. To be black does not means “I am poor”. There was black prople in Harlem way before this boom happen and lived quite well. Those say Harlem was the center of renaissance for African-Americans.
The What (Nope I didn’t go off)
Someday this war is gonna end…
Absolutely agreed 11:24.
This post is from a DEVELOPER’s perspective. There is a condo glut for the market segment that can afford $700-$1000 a square foot places in Brooklyn. For the other 95% of the borough’s population that can’t afford such high priced apartments, there is an acute housing shortage.
I realize our entire economic system today is predicated on this false belief that modern capitalism is low risk and high reward, but that is a delusion. Developers of many of the condo projects that came online early got good returns because they took the risk when everyone though Brooklyn would forever be a dump. The followers took a risk believing the market here would forever be high-end luxury development.
They took that risk, and it didn’t pay off. Sucks for them, but that’s why capitalism is so great. If there is truly a problem, they will simply keep lowering the price until the poor schleps living in delapidated century-old apartments can afford it.
I mean seriously. What if the auto industry was in the toilet and no one was buying $50,000 BMW cars. What if they lowered the price to $25,000? Or $15,000? You know they would sell them in a heartbeat. The same is true here.
By the way – this very scenario happened in Harlem in the early 20th century. Developers built the entire neighborhood as luxury housing. The rich white buyers didn’t appear. So what happened? It went to poor blacks who previously were restricted to tenements (that now rent for a lot of cash in hip neighborhoods). Such is how change occurs in an urban context. It is a story repeated all over New York City.
i rent- i save and i will wait unitl what i want can be bought on my income
all the people claiming to make all this $$ on their properties, you have not made didly until you sell
paper gains are not real $$$$
11:47 – the cycle you are talking about can continue for longer than a year or so b/c as people (and developers) can’t sell their units at prices they want (or need to cover their debt) many of these units will enter the rental market, thereby maintaining the attractiveness of renting in declining (or even uncertain) market.
In terms of “carry costs” renting is alot cheaper then owning now and will remain so until prices fall significantly or rents rise significantly (or both) – Once you remove the assumption that a RE unit is always an appreciating asset, the economics of renting vs. owning skew way over to renting at current prices.
“Or is there still plenty of need and demand for new housing, just not at these prices?”
It doesn’t take a rocket scientist to tell you that if something is priced too high it won’t sell, in any market.
And, I’ve read precious little about construction quality. Many of these new condo buildings are shoddily built and the developers have the nerve to charge top $$$. Smart buyers aren’t going for that.
Also, to respond to Montrose Morris RE: On The Park, I walked by it last weekend and was pleasantly surprised at how the building’s massing echoed common forms and lines of other buildings on both St. John’s Place, and Plaza St. East. So, I disagree when you say that the building doesn’t fit in with its neighbors. I think that it’s a modern interpretation of those very tall buildings on the other side of GAP.
I think prices on crappy new construction will come down 20%, they will eventually sell and then developers will start paying more attention to detail and we will have a more beautiful city because of it.
No end of the world.
Prime Park Slope, Ft. Green, Brooklyn Heights might be flat-ish for the next year, although personally I’m still seeing some price gains for the nicer co-ops and brownstones.
What 11:24 said.
The problem is their is not enough people turning in their leases for a condo or coop.
The condo boom is fueled by people streaming in from Manhattan and over-seas. Most people that move to NYC rent and dont buy right away. People are no longer streaming in from manhattan and renters dont seem to be aggressively saving for a downpayment and closing costs. So right now the market is at a stale-mate.
I agree, prices may come down a little in the next year or so, but as rents rise, more Brooklynites and Manhattanites are forced into the finaincial decision to buy something. So dont look for a 25% drop all of you renters out there. Aint gonna happen.
Less supply does not equal higher demand.
People just don’t want to pay premium prices for the junk.
Hence the inventory will languish on the market and prices will drop further.