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Demand for new developments pushing up prices in parts of New York

Despite the uncertainty and volatility that defined 2016, the real estate market in New York was and even broke several record highs mainly due to sales in new developments, the latest research shows.

Prices throughout much of Manhattan and Brooklyn increased in 2016 with median prices, average prices and prices per square foot all reaching records and for the first time ever, the average price in Manhattan exceeded US$2 million.

These records were largely driven by the number of new development condominium transactions, particularly in Downtown West and Midtown West, according to the analysis report from international real estate firm Knight Frank.

It points out that while activity may be moderating, prices are yet to follow suit and low interest rates and a steady jobs outlook kept demand robust throughout 2016.

It also points out that despite the stronger dollar, foreign interest has held up with international buyers making up 25% of the condominium resale market and 35% of demand for new development sales.

Demand has been particularly strong for new developments in the sub-US$3 million price segment, while supply at this price point has been particularly tight since the financial crisis of 2007.

The report explains that it is only recently that supply is beginning to increase, with more new developments in the pipeline and that is a major driver for the market. One such development aiding supply is the mass regeneration of Hudson Yards, which will bring 5,000 residential units to the market.

The report also says that New York is still regarded as a safe haven for foreign buyers who often have to contend with taxation issues and/or instability in other cities around the world. In many cases, these buyers are shaking off weaker currency exchanges for the strength of New York real estate.

‘Furthermore, low interest rates and a healthy job market have spurred many long term renters into first time buyers meaning properties priced below US$3 million move fast.
The strong underpinnings of the US economy and historically low interest rates are likely to be maintained for some time contributing to a stable real estate market for the foreseeable future,’ it explains.

Year on year prices in Downtown West have increased by 28.8% year on year, by 16.3% in Midtown East, by 13.9% in Midtown West and by 10.5% in Lower Manhattan. Long Island City saw annual growth of 14.1% and North East Brooklyn 4.6%.

But Downtown East has seen prices fall by 9.4% while in Brownstone Brooklyn they fell by 3.6% year on year and in Williamsburg and Greenpoint they were down 12.6%.

The report picks out the Lower East Side and East Village, Lower Manhattan, Brooklyn and Long Island City as areas to watch in 2017. It explains that the highly fashionable jet-set crowd are showing interest in the Lower East and East Village, especially new developments.

While Lower Manhattan is known as the city’s financial district it is becoming sought after for living with increased access and connectivity to the area where developers have added several luxury high-rises to the area including 1 Seaport, One Wall Street, 125 Greenwich Street and 45 Broad Street.

Long Island City, the report says has changed from an industrial neighbourhood known for its large warehouses, parking lots and film studios into a premier residential neighbourhood filled with galleries, museums and a thriving arts community and again there is a lot of interest in new development such as the Dutch and Factory House.