Prices in Manhattan’s luxury sector reached dizzying new heights in the final three months of 2016 despite mounting evidence the top end of the market is struggling.
At $9.37 million, the average cost of a home in Manhattan’s luxury sector (defined as the top 10% of sales) capped off the year more than 20% higher than during the same period in 2015, while the median price was up 9.5% to $6.56 million, according to a report Wednesday by Miller Samuel and Douglas Elliman.
More:Manhattan Prices Close to Record High Amid Signs of a Cooling Market
At the same time, the fourth quarter saw the second highest number of $10 million-plus home sales since the financial crisis began in 2008.
However, the figures have a caveat, as they are to a large extent propped up by "legacy" sales that went into contract one to two years ago in some of the city’s most expensive new developments when business was still booming, but only closed in the fourth quarter as the buildings are, finally, now completed.
"Legacy contracts from one to two years ago caused record prices for condo and new development markets," confirmed Jonathan Miller, chief executive of Miller Samuel and author of the report.
More recently, there have been signs that activity at the top end—especially new developments—is starting to soften as demand weakens amid global political and economic uncertainty and an oversupply of shiny new condos hitting the market this year.
Indeed, new development listing inventory in the luxury sector was 23.4% higher year-over-year in the fourth quarter of 2016, while resale properties were down 26.4% as sellers increasingly pulled overpriced properties off of the market, according to the Douglas Elliman report.
Overall, the number of luxury sales were down 3.3% year-over-year at 289, while the number of days a property spent on the market crept up 3.3% to 155. The listing discount (the change from final listing price to contract price), meanwhile, has more than doubled to 8.6%
Across the market as a whole, and not just within the luxury sector, the average sales price was 7.7% higher growing to a record $2.09 million, but the median was down 8.7% to $1.05 million as the share of studio apartment closings increased from 11% to 15.9%.
Sales were down 3.7% year-over-year at 2,864, while the market share of bidding wars also fell by more than half to the lowest level in four years.
More:Manhattan’s Luxury Housing Market Sees ‘Decent’ Ending to 2016
"The final quarter of the year showed a continued easing of conditions, capping off a year without the frenzy seen in the prior several," said Mr. Miller. "The pace of the market was fastest at the entry level and slowest in larger apartments categories."
This chimed in with a separate report from brokerage Halstead, which found that the average apartment price in Manhattan reached a record $2.1 million in the fourth quarter despite a decline in the number of sales. It said that this was fueled by luxury new development closings.