The Covid-19 crisis has delivered a stunning gut-punch to the New York City luxury real-estate market, applying downward pressure at a rate that surpasses both the 2008 financial crisis and the period immediately following the 9/11 terrorist attacks.
In the West Chelsea district, a recently built ultra high-end boutique condominium known as the Getty slashed prices for its remaining units by as much as 46%. One full-floor, four-bedroom apartment at the Peter Marino-designed building was lowered to $10.475 million from $19.5 million.
“Truth be told, you need to do something drastic and dramatic to attract attention,” said Ran Korolik, a partner at Victor Group, a developer of the project. “I didn’t want to reduce prices by 15% or 20% and then have someone come along and try to negotiate another 15% or 20%.”
The crisis comes at a time when sales and prices in the luxury market were already under pressure. “It’s not like New York City is all of a sudden on sale. New York has been on sale for the past 24 months,” said Tal Alexander, a luxury agent with Douglas Elliman. “Sellers who are motivated and want to do deals need to add on another layer of discount.”
The numbers are unprecedented. Between March 23 and August 16, sales of Manhattan homes were off 56% year-over-year, according to UrbanDigs, a real-estate data site. For properties priced at $4 million or above, sales were down about 67%.
That slowdown was driven in large part by New York’s strict lockdown during the worst of the city’s crisis. Prohibited from showing properties in person, agents had to rely entirely on virtual tours, which most said were of limited value. The subsequent protests and riots following the killing of George Floyd also rocked the city, and resulted in the boarding up of stores, museums and restaurants that had already been closed because of the virus.
Adding to the storm: Real-estate agents said Manhattan sales inevitably slow in a presidential election year, perhaps because buyers waver amid uncertainty. And some agents believe wealthy home buyers have been discouraged by recently enacted taxes on high-end home purchases. Calls by Rep. Alexandria Ocasio-Cortez and other Democrats to address the pandemic-fueled economic crisis by further taxing billionaires who live in New York state have only fueled those concerns.
Many of those wealthy New Yorkers have decamped to the Hamptons or to Palm Beach, Fla., amid the pandemic and haven’t returned, a point bemoaned by New York Gov. Andrew Cuomo, who jokingly offered to buy drinks for high-net worth New Yorkers who would return to shore up the city’s tax base. He has opposed placing a further tax on billionaires, who make up much of that tax base, for fear of driving them permanently out of the city.
The pandemic sent high-end agents with those ultrawealthy clientele into a tailspin as they tried to navigate the sensitivities of the moment.
“Calling people now, it could be like calling them after shiva or after a funeral,” Mr. Korolik said. “You don’t know who died or how people were affected by the situation. Maybe their client didn’t take a salary this year.”
Even as the city reawakens from what New Yorkers hope will be the worst of the pandemic, and the protests have quieted, agents said it has been hard to get buyers off the sidelines. Some of the few deals that have been done have closed at significant discounts.
Following months of negotiations, and a last-minute price adjustment related to the pandemic, financier Michael Price sold his nearly 9,000-square-foot Upper East Side townhouse for $18.8 million in late July, or 51% off its original asking price of $38 million in 2016. Mr. Price and his wife Jennifer Price purchased it for $14 million in 2003, records show. When reached by email, Mr. Price said the sale was none of the reporter’s business.
And a five-story Chelsea mansion sold in early July for $14.99 million, or 41% off its original listing price of $36.8 million in 2016, records show.
Agents said the greatest discounts are in new developments, where developers with stacks of inventory need to move product to meet loan repayment deadlines. “Any developer who broke ground after 2016 in Manhattan is going to be lucky to get most of his equity out,” Mr. Korolik said.
On the other end, sellers with move-in ready homes, particularly those with outdoor space and home offices, are in the best position to find buyers, said Scott Harris of Brown Harris Stevens.
Yuval David, an actor, television host and filmmaker, said he put his two-bedroom condo in Manhattan’s trendy NoMad district on the market for $3.895 million earlier this month. “I don’t think I’ll be able to make a massive profit, but I think I’ll be able to break even,” he said. He and his husband paid the same price for the unit in 2015, records show.
Mr. David noted that his modern apartment has a small office space he uses as a production studio. The second bedroom also has an office nook with views north and east to Fifth Avenue. “People are now looking for that kind of live-work environment, so apartments like mine are getting more interest,” he said.
Mr. David said he and his husband, attorney Mark McDermott, are looking to downsize so that they can buy a second home in Washington, D.C., closer to his family.
Terrence Oved, a New York real estate attorney, listed his nearly 3,000-square-foot triplex Sutton Place penthouse with a large private rooftop terrace for $5.995 million on August 1. He paid $5.5 million for it 2013, and invested another roughly $1 million to customize and upgrade it, he said.
Mr. Oved said he is hopeful that Covid-era buyers are looking for outdoor space, a unique product and a smaller building like his with just a handful of units, so that they won’t have to walk through crowded lobbies or interact with neighbors. He said he believes “there will be a flight away from large monolithic buildings with hundreds of similar apartments to unique boutique buildings.”
Award-winning composer Christopher Cerf, who wrote music for the children’s television show “Sesame Street,” and his wife Katherine Vaz, an author of books on the Portuguese-American experience, were one of the few lucky sellers to make a deal for their home during the pandemic. They closed on the sale of their Upper East Side townhouse for $7.8 million on June 1, just as the city began to emerge from the worst of the crisis.
They had been looking to downsize for some time, and received an off-market offer from their neighbors, the Andrew W. Mellon Foundation, in February, before the crisis took hold in the U.S. They were relieved then when Mellon, who wanted to expand their offices into the property, didn’t back out of the deal, especially since a tenant to whom they had rented a portion of the property had decided to move out.
“They told us they were going to move out and then the pandemic hit,” said Mr. Cerf, 79. “We knew we wouldn’t be able to show the property, so we said, ‘Gee whiz, we’re going to have a real cash flow issue here.’”
Mr. Cerf and Ms. Vaz described a bizarre and “otherworldly” closing experience. Their lawyer, the only person they had seen for months with the exception of the mailman, arrived in a mask and sat 6 feet away in the dining room and sheepishly slid the paperwork across the table. After he left, they washed their hands. Their agent, Astrid Pillay of Halstead Property, communicated with them virtually.
There have been some bright spots. At 111 West 57th Street, a mega-tower under construction on Billionaires’ Row just south of Central Park, developer Michael Stern said his team signed two deals of roughly $30 million apiece during the depths of the pandemic, with only “slight” discounts to the asking price. In one instance, the buyer, an international businessman in the tech industry, never saw the unit; showings were done virtually. As a developer, Mr. Stern said he’s “naturally optimistic” but still bullish on the city. “The idea that New York is over is preposterous,” he said.
Mr. Alexander said he closed several deals, including the sale of a penthouse at 56 Cooper Square downtown, for only 5% off the last asking price of $9.99 million. One of his buyers even encountered a bidding war on a property priced at $9.5 million at 30 Park Place in lower Manhattan.
Beth Fisher, a new development marketing executive at Corcoran Sunshine, also said her team has sold three penthouses at the Park Loggia, a new development condo near Columbus Circle, since the lockdown orders in March.
Developer Jordan Brill of Magnum Real Estate Group said his company is having some success at two of their new condo buildings with rent-to-own programs that allow would-be buyers to live in the projects for up to a year before they commit to a purchase. With so much uncertainty around when or if schools and offices are opening—and the timeline of a prospective coronavirus vaccine—the program offers flexibility for families, and gives them a chance to see how the market shifts in the next 12 months.
Mr. Brill said he’s done more than 30 rent-to-own deals at his company’s two projects, 100 Barclay Street near the World Trade Center and 196 Orchard Street on the Lower East Side, since he rolled out the program in December, with the majority done since the pandemic began. Buyers get a 75% rent credit toward a prospective purchase for the first six months of their lease and 50% thereafter.
By and large, however, to the extent there are deals they tend to be at the $1 million to $3 million range of the market, said attorney Pierre Debbas of Romer Debbas. Buyers in this range are typically financing purchases, and can be motivated by ultralow interest rates.
Two such buyers, 34-year-old affordable housing project manager Hank Minskoff and his fiancée, teacher Jennifer Boyle, said they bought a two-bedroom unit at the David Adjaye-designed tower 130 William, a new development in lower Manhattan, for its full asking price of just over $3 million during the lockdown. While they never got to physically see inside the building, Mr. Minskoff said he felt comfortable after looking at virtual materials and biking past the tower, which is still under construction.
Mr. Minskoff said he and his fiancée, who currently live in Brooklyn’s South Williamsburg neighborhood, wanted to take advantage of the ultra low interest rate environment to buy in their “dream building.”
The pandemic, and its accompanying interest rates, “finally made this building in particular a possibility,” he said.
Ms. Fisher said most developers are being realistic about the environment. “There are many that accept the fact that this isn’t going to be the biggest moneymaker of their career,” she said. “That’s how it goes.”
For the most part, they are just hoping their market is down—but not out.
“What’s that Mark Twain quote?” Ms. Fisher asked. “’Rumors of my death were greatly exaggerated.’”