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Manhattan condo market cracking, developers roll out big incentives

Real estate developers always offer big sales to kick off the busy spring season — but one new deal is less a sale and more a market signal.

It seems buyers are becoming reluctant to pay sky-high asking prices in Manhattan, which has an oversupply of swanky new condominiums.

Toll Brothers, a national luxury homebuilder with a pricey "City Living" condominium brand, is offering to pay buyers' taxes on two new developments in two of Manhattan's hottest neighborhoods, Chelsea and the West Village.

The banner is right on the website: "Sponsor pays mansion and transfer taxes at select communities." Those taxes amount to 2.5 percent of the purchase price, and the condos at these two developments are listed for $2 million to $13 million. That means the discount can amount to more than $250,000.

"They're trying to pull out all the stops before they have to lower the price," said Jonathan Miller of Miller Samuel, a New York-based real estate appraisal and consulting firm. "Much like with rentals, they're doing everything they can to protect the asking price, so it doesn't damage the units that haven't sold."

Manhattan saw rampant new construction since the recession, and thousands of new luxury units flooded the market, with stark consequences. The median sale price for new construction ended 2016 down 44 percent, compared with the end of 2015, according to a quarterly report from Miller Samuel for Douglas Elliman. Closed sales dropped 13 percent. Most worrisome, the supply of condos for sale rose a striking 34 percent.

Developers see the writing on the wall, but, like homesellers, they are reluctant to lower prices.

"The reality is, they're going to have to do that," said Miller, who also notes there is always a delay in lowering prices when a market turns. "The measure of that delay is a slowdown in sales."

A Toll rep would not characterize the discount or the state of the Manhattan market, but gave the following statement: "The Sales Event offers a limited-time opportunity to take advantage of exclusive, money-saving incentives, which vary among communities and regions."