The Luxury Market: Strong and Stable

It is widely acknowledged that the historically low interest rates have fueled the market of moderately priced properties, which has resulted in a strong market and higher prices for properties in this category. Further enhanced by the steady trend toward hearth and home, purchasers of more moderately priced properties have been investing a significant portion of their net worth in their homes. The relationship between the preference for an investment in a home, favorable interest rates and a strong market is clear and direct. But, what effect has this prolonged period of favorable financing had on the high end of the market?

At the very high end of the market, there have been more than a dozen sales of cooperative apartments with overall sales prices above $10,000,000 since the beginning of 2002 when the fuel of low interest rates ignited the real estate market. On Fifth and Park Avenues, as well as along Central Park West, the average sale price for these luxury apartments was more than $2,800 per square foot. It is notable that many of these apartments were located in buildings that do not permit the financing of a purchase, or limit the amount to no more than one-half of the sales price.

In the $5,000,000 to $10,000,000 price range, there was considerable activity on Fifth and Park Avenues, and Central Park West, where average prices for more than fifty sales of cooperative apartments were $2,040, $1,878 and $2,044 per square foot, respectively. And in the $3,000,000 to $5,000,000 range, sales of more than fifty cooperative apartments in the same prime locations averaged $1,617 per square foot on Fifth Avenue, $1,400 per square foot on Park Avenue and $1,555 per square foot of Central Park West. Apartments on Fifth Avenue and Central Park West, where views of Central Park command a premium, exceeded sales prices on Park Avenue.

Although not directly benefiting from the low interest rates for their residential purchases, buyers in the luxury market have exhibited a level of confidence similar to that found in other segments of the market. Compared to other investments that have recently been more volatile, an investment in a home continues to represent value throughout the residential market.

Alice Palmisano
Senior Director
10/2003

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