Almost-new condos are holding their value
Buyers who once would have headed straight for the sleek lines and polished finishes of new condominiums are discovering a different sector of the market: almost-new condos.
Buildings finished a few years ago appeal to these buyers, because they can offer a contemporary aesthetic without many of the risks that come with brand-new construction. Chances are good that a building well beyond infancy, and maybe even toddlerhood, has already overcome any growing pains. Banks also view established buildings more favorably, making mortgages easier to come by. On top of that, prices are often lower than for comparable new units.
“Almost-new development seems to be picking up steam, and I think it’s because it’s seen as an alternative for people who want new construction,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel and a partner in Condominium Recovery, which invests in real estate. “Almost-new has all the amenities that were widely touted during the boom, but they’re already established. All the kinks have been worked out, and there are no empty units to worry about.”
While new-development units accounted for 57 percent of all apartments sold in Manhattan at the height of the condo boom in 2006, they now account for only 16 percent of sales, said Mr. Miller, who also provides market data for Prudential Douglas Elliman. But almost-new condos, which he defines as units three to five years old, have picked up some of the slack, with 10 percent of the market, versus less than 2 percent in 2007. Those figures reflect changes in inventory, he said, but still show a significant shift in buyers’ preferences.
Jessica and David Saitowitz started house-hunting in February. They signed a contract last month for a TriBeCa condominium completed in 2007.
“We looked at one new development where the person showing us around said move-in was supposed to be in May,” said Ms. Saitowitz, who works in financial sales. “But we were standing in units with no walls, and you couldn’t even tell where the bathrooms would go.”
She and her husband were much more comfortable buying a resale in a three-year-old building. “It meant that the building had been lived in,” she said, “and if there was anything wrong, it had been dealt with already.”
Mr. Miller noted that prices in new developments tend to be higher than in almost-new buildings, because unlike most resales, they “haven’t adjusted to the current pricing conditions.” That’s because the developers’ banks have not allowed them to lower their prices, he said.
Doug Newkirk, an agent with Core, listed a $1.295 million one-bedroom at 505 Greenwich Street in SoHo that recently went into contract after three weeks on the market. “The advantage of a modern building like this one that was built mid-decade,” Mr. Newkirk said, “is it’s still in incredible condition and its tax abatement hasn’t run out yet.”
Mallory Weil, a senior vice president of Halstead Property who has a listing at 505 Greenwich and also lives there, said the building was less expensive than some of its neighbors.
“We were the first condo to go up five years ago” in the area, Ms. Weil said, “and because the market went up so quickly after that, later developers wound up paying a lot more for their land.” She said original owners were receiving an average of $1,200 a square foot, “which is quite reasonable for a building like this one.” Many units originally sold for under $1,000 a square foot.
Banks clamped down on lending for mortgages in new construction after the Lehman Brothers crisis in September 2008. Melissa Cohn, the president of Manhattan Mortgage, says major lenders now will not make loans in a new building unless 70 percent of its apartments have closed. Another potential snag is a newly enforced requirement that buildings have at least 10 percent of their annual budget in a reserve fund. “Brand-new buildings tend not to have it,” she said, “and it usually takes a few years for a building to build that up.”
Buyers are also steering clear of new developments to avoid the possibility that the project will never get finished or not turn out as promised.
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