Although there are many classic co-ops among the top luxury houses in New York, in recent years, condominiums have become more popular in the luxury market in Manhattan.
Since the financial crisis, new condominiums have sprung up like mushrooms, prying away many potential buyers of co-ops. Due to the surge in condominiums, the development of the co-op market is relatively lagging. Although buyers are still fiercely competing for more affordable co-ops, the situation of condominiums and co-ops is quite different in the range of US$4 million and above. Condominiums in non-prime locations can usually sell for good prices, while some high-end co-ops in good locations have been sold at reduced prices. In 2021 alone, the transaction volume of Manhattan condominiums of US$10 million and above is five times that of co-ops of the same price; the transaction volume of condominiums of US$4 million and above is 2.5 times that of co-ops. Even so, the price volatility of co-ops is smaller than that of condominiums.
From 2008 to 2010, in the aftermath of the financial crisis, condominiums depreciated by about 30%, especially in the high-end market. During this period, the price of co-op apartments fell by about 15% to 20%. Although price drops are inevitable, the magnitude and speed are relatively slow. For suitable buyers who meet the conditions, the co-op apartment is a stable investment choice with considerable returns. In addition to the overall stability that real estate can provide, some co-ops have unmatched advantages over condominiums, and are more likely to achieve the goal of value preservation and appreciation. Next, we will analyze when luxury home buyers should switch to the co-op apartment market and which types of properties are most likely to achieve long-term value-added.
Although condominiums have brought fierce competition to the market, most high-end co-ops in Manhattan have two unmatched advantages: space and location. If you know about the projects along Central Avenue West Road and Fifth Avenue, many of them are co-op apartments. In this case, the location is better than the property type. Compared to new development projects, many older residential units have a more spacious floor plan. During the COVID-19 pandemic, this factor is particularly important for some buyers.
Nowadays, when real estate developers construct residential projects, they often seek to maximize profits and find ways to plan more units on one floor. In contrast, the age-old pre-war co-op apartment building has been carefully considered in the layout design, and from the perspective of total price, the co-op apartment is the king of cost-effectiveness. In a new development project, $5.5 million can only buy a set of 2,100 square feet of three-bedroom unit, neither enjoy the spacious living space, the view of the landscape may also be mediocre.
In general, the unit price per square foot of luxury co-op apartments is significantly lower than that of condominiums. If we count the top 10% of luxury co-ops in the Manhattan market, the average price per square foot is US$1845, and the average price per square foot of the top 10% condominiums is US$2904. Obviously, for the same price, a co-op apartment can provide more space and is much more cost-effective in terms of price. Regardless of whether the size of the apartment is a priority for buyers, if coupled with a superior location, such a co-op apartment with lasting market value is difficult to refuse.
The co-ops around Central Park are among the first real major residences in New York. No one wants to tear them down and convert them into condominiums. It is the superior location, unique style, exquisite design and generous space that make these classic co-op apartments.
One of the main reasons for buyers to choose condominiums is that the near-strict barriers to entry of certain co-ops are daunting. The board of directors of some shared apartment projects are often criticized for being absurd and unreasonable, which will make the brokerage community stay away from them. Maintaining a good reputation on the board of directors is one of the best ways to maintain the value of an apartment, otherwise it may hinder the viewing experience.
For potential buyers, paying close attention to the requirements of the apartment project for reserves, pets, subletting and construction will help to understand the many challenges that will be faced by becoming a co-op apartment owner, and help with the difficulties been mentally prepared that may exist in future sales.
Some regulations will definitely lower the price of a co-op apartment, such as summer construction regulations, no washing machine or dryer, no use as a temporary residence, and prohibition of pets. "("Summer construction regulations" are a type of restrictive clause that is more common in co-op apartment projects, requiring renovations or other constructions to be carried out only in summer.)
Although the board's detailed financial review of buyers can ensure investment stability to a certain extent, in the current market environment, co-op apartment projects with high overall flexibility may have greater long-term appreciation potential.
Buyers are advised to check the sales records of other units in the building to understand whether the board of directors of the co-op apartment may intervene in the transaction. The listing time of co-op apartments is also an important indicator. Through statistical data, it can be basically judged whether the listing is'timed right' or'timed wrong'. If a co-op apartment is sold at the original asking price within 70 days of listing, it means that the price is reasonable; otherwise, the sales cycle may be as long as 179 days. If the price of the apartment is reasonable, the final selling price is 3.7% higher than the asking price on average; conversely, the selling price may be 12% lower than the asking price.
If the co-op project can formulate reasonable rules and regulations, has recently been upgraded (for example, adding a gym), and there is no black history of rejecting transactions in order to obtain higher prices, then this fully illustrates its long-term value. If you choose a co-op apartment based on your own preferences for architectural style, lifestyle or geographic location, you are likely to encounter a buyer with the same taste and willing to pay a premium when you sell your house in the future.
Investing in Co-Op apartment is like holding a blue chip. You know in your heart that it will rise, but the magnitude and volatility are uncertain.