NEW YORK CITY—Brooklyn ended 2017 with a bang, according to the Halstead Property Development Marketing’s year-end report.
Brooklyn’s new development market remained strong with a 9.4% year-over-year increase in price-per-square-foot and a 73% year-over-year increase in median price for entering contracts. The report attributes the tremendously high median price increase to the condominium units priced above $2.5 million entering contract at Pierhouse at Brooklyn Bridge Park, 51 Jay St and 251 First St.
In a GlobeSt.com interview, the president of Halstead Property Development Marketing, Stephen G. Kliegerman explains Brooklyn has been playing catch-up to Manhattan for many years. He says on average there is a 30% discount when buying a home in Brooklyn compared to Manhattan. The average one-bedroom in Manhattan costs approximately $1.2 million, with the average one-bedroom in Brooklyn selling in the high $800s, according to Kliegerman.
“I’ve seen how people who haven’t been back to Brooklyn in 10 or 15 years, who go back now to look for housing, are so impressed by the amount of amenities, level of architecture and design now going into homes, which wasn’t happening five or 10 years ago,” says Kliegerman. Brooklyn’s available inventory fell more than 22% year-over-year indicating it remained a hot market in 2017.
Underscoring how much Brooklyn has changed, he describes how the borough redefined itself over the last decade. “There’s always someplace to eat, always someplace to go, tons of people, so much more happening in Brooklyn than there was then. There are so many opportunities,” he says. “Not everyone has to live in Manhattan.”
Plus, on average it is still significantly cheaper to buy in Brooklyn.
In Brooklyn, new development entering intro contract averaged $1,490 per-square-foot in 2017. In Q4, the median price in this category was $1.96 million. In Manhattan, pricing for new development units entering into contract averaged $2,282 per-square-foot in 2017. In Q4, the median price for this category was $2.4 million.
However, Kliegerman also notes the emergence of new submarkets in Manhattan. Midtown West experienced the largest growth quarter-over-quarter by price-per-square-foot in Manhattan outside of Billionaire’s Row, the luxury developments on the southern end of Central Park. This submarket increased 12.7% in average price-per-square foot, reaching $1,961. The report attributes the increase to closings of condominium units at Manhattan View at MiMA, The Bryant and The Sorting House.
“As you look at the city, these new emerging markets are being created, like the Hudson Yards and the extension of Chelsea from 23rd to 30th streets,” says Kliegerman. “That our city continues to grow and expand even though everyone usually looks at New York City in general as a mature marketplace—to me that was interesting.”
He points to the changes in Hell’s Kitchen, and the expansion of the Lower East Side. Kliegerman says Morningside Heights, Washington Heights, Inwood and East Harlem are rich in opportunities for additional growth, and predicts changes similar to what is going on in Brooklyn will also happen in upper Manhattan.
However, he acknowledges the importance of diversity in the city stating rent stabilization will help preserve the ability of people to stay in Manhattan and help prevent economic homogeneity. He supports city and state governments allowing for programs for affordable housing ownership to be included with market-rate sales.
The Halstead data reported in Manhattan the median price of new development units entering contract in Q4 2017 rose approximately 8.3% quarter-over-quarter to $2.4 million. This fell 16.1%, year-over-year, with the report explaining this was due to pricing at the top-end of the market continuing to correct downward.
Kliegerman does not believe the tax reform will have a long term impact on New York City’s real estate markets. He says the Halstead data that shows a spike in Q4 activity supports his theory that Americans are basically consumers. “You can only hold consumers back so long. Eventually they are going to buy.”
However, the Douglas Elliman residential market report recorded Q4 2017 sales as the lowest in terms of numbers of transactions in the past six years, down 25.4% from three months earlier and down 12.3% from Q4 2016. Steven James, CEO of New York City, Douglas Elliman, says while the Manhattan residential sales market is still very strong, posting a median sale price of more than $1 million and an average sale price of more than $2 million, the specter of tax reform as well as the high cost of housing caused a sharp decline in sales activity in the fourth quarter of 2017.
Corcoran’s Manhattan residential Q4 report indicates the numbers of closed sales from the final quarter were basically unchanged from last year. This report stated signed contracts fell 14% year-over-year. It attributed responses to non-market factors, such as the tax reform’s adding complexity to buyer decision making.