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Considered by many to be a transitional year, 2023 is positioning itself as a bridge between the end of the pandemic and the aftermath and a return to a more stable economy. But for now, there are a number of pressing issues that the multi-faceted players need to deal with. For those particularly active in the condo market, rising interest rates and inflation will continue to be a major deterrent to both new construction and sales.
In general, the condo market will need to overcome several headwinds related to the economy this year, but some US metros face special headwinds. Two of the most important cities for inclusive development, New York City and Miami, are currently facing very specific issues. For example, Florida’s Building Safety Act is changing the parameters for ownership, management and construction of condominiums in the Sunshine State, while NYC is feeling the pressure of the low purchasing power of potential customers.
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Listing inventory for condos in the Big Apple has been on a downward trend for the past six quarters, while median selling prices declined year-over-year for the first time in five quarters, according to a fourth-quarter report. Douglas Elliman. Manhattan’s condo sector has slowed down from the craze of the past few years, Francis Greenberger, president and CEO of time equity inc., also seen. This has resulted in a market where there are now more lookers than buyers.
“We found that buyers have reduced their purchasing power by about 50 percent – which is a significant reduction,” Greenberger explained. multi-housing news,
People who could previously afford a $600,000 mortgage can now only afford half that, which is why Greenberger expects to see a substantial reduction in condo sales velocity in 2023.
Andrew Barocas, CEO MNS Real Estate, is also seeing the effect of higher interest rates on the condo market, especially on lower loan amounts. But it could also bring opportunities for brokers, he says, because buyers are now able to perceive value.
“It can be a successful market … When we can show someone that they can get the same apartment that sold last year for $900,000 for $1 million, it takes some of the other challenges off their mind.” can overcome,” Barocas said.
What is the future of NYC’s condo market?
Interest rates will continue to rise and, according to Barrocas, will peak in the first or second quarter of 2023, before stabilizing over the next 12 to 18 months. But for a first-time home buyer, the uncertainty of interest rates will definitely remain a significant deterrent.
However, New York City’s two-year supply of condo inventory is helpful in the current economy, Barocas believes. And with financing still challenging, many developers will find it difficult to deliver new products.
“There are a lot more projects looking for money than there are projects looking for money, a lot more people looking for funding than banks looking for money. 2023 will be an interesting year,” expects Barraux.
For condominium projects which were already completed, a trend is gaining momentum. With buyer preferences shifting towards ease of living and better well-being, branded residences are now in high demand and their popularity is likely to grow as the flight-to-quality movement – prevalent in the office sector today – moves into residential continues to enter the market.
“The idea of staying in a five-star hotel is only growing in appeal,” says Adelina Wong Ettelson, global head of accommodation marketing Mandarin Oriental Hotel GroupSaid MHN,
Florida’s condo market is adjusting
Chris Kennedy, Vice President of Preconstruction with National Contractors Suffolk, It is also observed that branded housing is becoming more attractive. West Palm Beach, Fla. Based in Washington, D.C., Kennedy’s company is currently providing construction management services for Aman Miami Beach Hotel & Residences and The Ritz-Carlton Residences in Palm Beach Gardens, Fla.
Kennedy said that after the pandemic, Florida’s condo market experienced an influx of out-of-state buyers searching for a “Florida lifestyle” and a lower tax burden. Some of them are now interested in more turnkey units—in lieu of designer-crafted homes where only the baths and kitchens were finished.
Kennedy expects luxury projects in South Florida to continue to do well, as they are less affected by interest rates due to the profile of buyers and the high volume of cash deals. Conversely, lower price point, urban condo projects, targeting buyers more dependent on traditional financing, will be harder to bring to market, Kennedy warned.
In addition, with Florida’s specific issues regarding climate change and flood protection, designers of new projects will have another issue to consider, especially when building on the coast and on low-lying land: sea level rise. Kennedy said that since the Surfside condo collapse, there has been additional sensitivity to best practices on structural design and waterproofing.
Florida’s Building Safety Act Is Changing the Game
The Building Safety Act, which requires statewide recertification of condominiums taller than three stories, is putting pressure on Florida condo owners and managers to update their properties. The new law requires that many buildings undergo an initial landmark inspection before the end of 2024.
“Unfortunately, the law requires condo boards to play the role of construction experts, and this is where a lot of things go wrong for the association and its budget,” said Greg Main-Bailey, executive managing director of Florida Development Services Group. Could be.” ColliersSaid MHN, “No buyer will want to walk into a condo building tied up in disputes with contractors and unfinished work,” Main-Bailey said.
One of the main issues he faces is the lack of qualified people in meeting the requirements of the Building Safety Act within the time frame required by law. From owner representatives and project managers to engineers and contractors, the industry is facing a shortage of experienced professionals that will be needed to handle the volume of work expected to occur in Florida condo buildings over the next few years. According to Main-Bailey, their job is far more complex than when dealing with new construction, as all the projects are already built and, more importantly, occupied.
“We are expecting a lot of surprised condo owners looking to sell once they realize the upcoming increase in cost of ownership,” Main-Bailey said.
Source: www.multihousingnews.com
