The New York luxury real estate market is set to experience a rise in residential prices as the supply of homes being offered at the mid-range luxury price of $5-$20 million decreases. The slump in potential new homes is due to a decrease in residential construction. With fewer homes available to purchase and constant or heightened demand, prices are expected to rise across the board.
The U.S. Census data reveals that the very high end of the Manhattan property market has seen a steady increase in sales. This is a good indication of a safe and attractive investment market for buyers looking to move into New York luxury real estate. It’s also good for sellers of luxury properties. A shortage of homes in any market increases the demand and prices for all residential properties, even the ones at the top.
Some real estate speculators are claiming that New York is set to experience one of its worst decades in new residential construction in the past 60 years. The census data reveals that, during 2000 to 2009, the city issued permits to build 231,228 units, approximately 23,122 per year. In contrast, for the first two years of the decade, the city issued only 7,800 per year. At this run rate, the decade would have only 78,000 more apartments, a fraction of what was built in the last decade.
While the Real Estate Board of New York admits to the risks involved in estimating new housing production trends based on just two years of data, there is no indication of a large influx in new housing anytime in the foreseeable future. Compounding this problem with increased construction costs and cuts to tax exemption programs (like 421(a) programs) and you have a serious lack of supply for New York’s ever growing urban population.
Everyone knows what happens when there is a lack of supply and ever growing demand, right? Prices will rise (everything else being equal). It is Economics 101.
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