The Third Biggest Story of 2017: Will the Luxury Market Continue to Sizzle?
2016 finally saw signs of life in the new condo market but most of the announced developments were luxury buildings.
And why not?
The new buildings, such as No. 9 Walton in the Gold Coast, are selling out as demand in the upper bracket remains strong.
Even the Ritz-Carlton, which first began marketing over 9 years ago, is seeing a surge in sales. From Crain’s:
Buyers closed on seven units at the Ritz-Carlton Residences from Dec. 1 through yesterday, according to Midwest Real Estate Data. That’s more than any building in the city, good news for any developer but particularly so at a project where only 26 out of 89 units were sold in the first nine years of trying.
Seven sales “would be happy-dance numbers for anyone,” said Karen Ranquist, a Berkshire Hathaway HomeServices KoenigRubloff Realty Group agent and partner in Ranquist Development, which has built several condo projects. She is not associated with the Ritz. Her firm’s building on Hubbard Street in the Fulton Market District has had two closings in December, and Ranquist said two more are scheduled in the building.
Hearing the Ritz’s December total, Ranquist said any developer “would be thrilled to have those closings in what is typically a slower time of year.”
Ranquist said the Ritz may be benefiting from the downtown market’s shortage of new-condo inventory during developers’ pronounced swing over to building luxury apartments.
“People look around downtown and say, ‘Where are there any condos?'” Ranquist said. Some high-end buildings are under construction now, but “you can’t move in until late 2017 or 2018.” At the Ritz, “you can buy and move in.”
Golden concurs. “We can sell and close sometimes in a week,” he said. “There’s definitely an advantage there.”
If you’re willing to wait, there are several prestige buildings under construction including One Bennett Place in Streeterville and the Vista Tower in Lakeshore East.
Will the upper bracket continue to sizzle in 2017?
Despite signs of slowing luxury market sales in NY, markets for luxury real estate in general I think will continue to rise due to the impending political change. Once The Rapist gets his proposed tax cuts passed, the chasm between the lower/middle class and upper class will grow even wider. The elite will control even more of the wealth in the US and fuel greater demand for luxury units, easily offsetting any negative impact that rising interest rates might have on those units.
Those who own property in non-hot neighborhoods may benefit if this concentration of wealth trickles out into their neighborhood where further investment in neighborhood amenities and overall improvement may spur gentrification, property value increases, and then even higher rents, supplemented by those who are pushed out from the green-zone looking for more affordable alternatives.
Those who continue renting will miss out on this inevitably rising tide. If all of this growth is steady (without irresponsible lending) than those who continue to “wait for the bubble to burst again” will be left standing on dry land before the seiche wave returns to sweep them away.
Make no mistake. The Ritz dropped their prices so that’s why sales took off. For example. Unit 15C and 16C were listed for $1.4 MM last year but 15C is now listed at $1.25 MM.