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The listing website, StreetEasy, recently reported that about 25 percent of the 16,242 new condos built in New York City since 2013 remain unsold, forming a “condo-bubble” that is likely to increase in size given ongoing construction and development activity. 

Despite lackluster sales, condo construction is still outpacing closings, with StreetEasy estimating that for every three condos completed as of 2018, only two have sold. 

Developers are blaming the slow market on recently enacted limits on local and state property tax deductions, as well as changes to the “Mansion Tax,” and the fact that international buyers, especially those from China, have stopped purchasing due to the ongoing “trade war” and fears of a U.S. recession. 

The report also noted that most of the unsold units are situated in the Lower East Side, where around 1,069 apartments have been built, but more than two-thirds remain unsold.  

The reason the LES tops the list is due to One Manhattan Square, a new 800-foot-tall tower that was completed this year.  Its 815 apartments “represent three-fourths of the new inventory” in the neighborhood, according to the Times.  And since August, only about 20 percent of its condo sales had closed.  And, interestingly, of the units that did sell, around a third have since reappeared on StreetEasy as rentals.   

In order to combat this glut, developers are slashing prices of new towers, either directly or through concessions like waived common charges and transfer tax credits. Others also speculate that the real-estate market may see a return of recession-like tactics, such as the bulk sale of units and converting condos to rental units. 

The exclusive One57 Tower, completed in 2014, and considered the forerunner of Billionaires’ Row, remains 20 percent unsold, with 27 of the roughly 132 multimillion-dollar apartments still held by the developer, according to Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants. 

When supply outplaces demand, that makes it a buyers’ market, at least as far as condominiums are concerned.  But many fear prices have yet to “bottom out.” 

“The progressive polices of the City and State have yet to fully manifest themselves,” noted Jonathan H. Newman, founding partner of Newman Ferrara LLP.  “If history is any guide, increasing homelessness, crime, and taxes are certain to result in yet additional market volatility,” he continued. “We anticipate pricing and sales declines to continue for months, if not years, to come.” 

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Should you need assistance with a real-estate transaction, whether a cooperative or a condominium, or with any other commercial or residential property, please do not hesitate to contact one of our attorneys at 212-619-5400. 

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