A New Millennium or More of the Same?

In the final years of the 20th Century, buyers of Manhattan residential real estate faced the Herculean task of facing the capital gains tax law, which eliminated the "rollover" of capital gains from the sale of one primary residence to the purpose of another, severely constricted the transfer of properties in the high-end, upscale Manhattan market. The resulting shortage of product, coupled with booming equity markets and abundance of available funds, has brought about the most competitive market for housing in this area since the World War II era.

The dawn of the new millennium has only confirmed this trend, as the high demand for–and meager supply of–Manhattan luxury housing continues in all size and price categories, from the smallest studio to the grandest mansion. For those properties that do become available, there are numerous potential purchasers lying in wait to make handsome offers. Multiple bidders and even bidding auctions have fast become more the norm than the exception.

The question remains: What does the balance of the year 2000 hold? Will prices continue their upward spiral? Should buyers wait for a market correction, or jump into the market now?

Short of a major stock market correction or other financial catastrophe, the availability of product is unlikely to change much from what we’ve been witnessing recently. Construction of new residential units is hampered by the lack of appropriate locations in which to build. (Witness the upscale gentrification that’s now happening in such unlikely neighborhoods of the city as the Lower East Side, Hell’s Kitchen and Harlem.) With the few new projects that are introduced to the buying public, there’s a frenzy to purchase, and many of these "sell out" long before the building is constructed.

These owners who decide to sell are aware of these realities, and consequently set asking prices over and above comparable sales which preceded theirs. And buyers are paying those prices, rather than waiting to see what the next round will bring.


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