The firm behind two so-called “affordable luxury” condominium buildings in Manhattan where prices start at around $1 million has cautioned that the current cost of land now makes it virtually impossible for developers to build to this price point.
In a market where the average high-end property price is north of $8 million and there is a glut of super luxury homes for sale, Magnum Real Estate Group is one of a handful of developers going against the grain and offering homes of what they believe to be of a similar standard, but at a much lower price point.
It recently started selling condominiums in two buildings -- 389 East 89th Street on the Upper East Side and Luminaire in Gramercy. Prices range from around $1 million to $3 million at both buildings for 1- to 3-bedroom apartments that will measure up to 1,582 square feet at the former and 1,891 square feet at the latter.
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While this may still sound like a lot of money, it’s relatively cheap for Manhattan and according to Magnum, interest has been “overwhelming,” especially from first-time buyers and young couples, who might have thought they have to look in New York City’s other boroughs to be able to afford a condo similar to these ones.
However, there may not be many more of these mid-market condos cropping up on the market despite strong demand as Ben Shaoul, founder and principal of Magnum, stressed that it was only able to do these projects by buying cheaply. He bought the 89th street property several years ago for just $800 a square foot. Since then land and building prices have risen further.
"There is a serious lack of inventory for new luxury homes priced from $1 million to $3 million. While demand continues to grow, it has become difficult for other developments to cater to buyers looking for apartments in this price range. Current land prices make it virtually impossible for developers to build to this price point,” Shaoul told Mansion Global.
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“We purchased these buildings for a lower cost per square foot than [if we had built] them today. As a result we are able to bring something truly unique to the market that is proving to be very popular.”
Leonard Steinberg, the president of Compass, whose firm is handling sales at Luminaire, added: “If the minimum wage is going to be going up to $15 an hour, what happens to the wages above that? They’re going to go up too. So if labor costs go up, if land costs even stay where they are today and material costs go up, you cannot deliver this price point. So this is a very unique moment where actually you do have this price point available.”