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Corona crisis hits New York real estate market harder than 9/11 and the financial crisis

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The New York real estate market is currently struggling with severe slumps. In times of the Corona crisis, many customers shy away from buying decisions, the consequences are enormous price drops and a drop in demand in the real estate industry.

In the past, New York has often faced various challenges. Nevertheless, the real estate market was always considered to be relatively robust in times of crisis, at least somewhat more stable than stock or bond markets. Real estate prices fell by a maximum of 25 percent even during major disasters such as the terrorist attacks of September 11, 2001 or the 2008 financial crisis. In times of the Corona crisis, however, the real estate market is now recording much worse values

Manhattan home sales decreased 56 percent year over year between March 23 and August 16, according to UrbanDigs, a NYC real estate data company. The difference is even more serious in the case of higher-priced apartments: Sales of properties with a price of more than 4 million US dollars fell by as much as 67 percent compared to the previous year. New registrations fell by 21 percent, and for properties priced at more than four million US dollars by almost 35 percent.

The American real estate company Douglas Elliman describes similar tendencies at the beginning of the pandemic: As a result of the Corona crisis, the average price for an apartment in Manhattan fell to $ 1.9 million in March. According to the company, the prices of luxury real estate fell a full 11 percent in the second quarter.

Already in the third quarter of 2019, the Financial Times reported declines in house sales in Manhattan, citing figures from the real estate broker Core: In the third quarter, the median price for apartments in this area fell by twelve percent compared to the previous year. Other brokerage companies have also reported enormous price drops resulting from falling demand and at the same time increasing supply of luxury apartments.

The real estate industry is therefore not completely unprepared for the current developments in New York: “For a long time everyone here has been expecting the big bang,” Sebastian Steinau told WELT, “now it’s here”. The luxury real estate agent in New York is seeing high price discounts across the city, from the Upper East Side to Central Park. “New York,” says Steinau, “is a paradise for buyers right now.”

The reasons for these enormous falls in prices and demand are numerous:

On the one hand, the options available to real estate agents in the Corona crisis are significantly limited: Real estate agents were prohibited from showing customers the properties in person; it had to be switched to virtual tours. According to most agents, however, these are only partially satisfactory and not of the same value as live tours.

According to Ran Korolik, partner of the real estate management company Victor Group, the relationship between real estate agents and customers is also badly affected by the current situation. Because when contacting potential buyers, agents are not informed about the current life situation of people in this difficult time: “They do not know who died or how the people were affected by the situation. Maybe your customer didn’t get a salary this year, ”Korolik told Mansion Global.

Another reason for falling demand and falling prices in the real estate industry is the general insecurity of people in the Corona crisis: Short-time working and increasing unemployment are shaping the current era and preventing many potential customers from making purchase decisions. “In my 20 years as a real estate agent, I have never seen what is happening here,” says Frederick Peters, Managing Director of the Warburg Realty real estate agency in New York to DIE WELT. “The market shows that everyone is afraid of the future.”

Because nobody knows exactly what the future will bring. “It could be that the way people live here will change permanently,” says real estate agent Steinau. The expert suspects that lower buildings will become more popular in the future and the demand for apartments in tall skyscrapers in New York will flatten. Full cabins in elevators and communal roof terraces could still deter people, even after the pandemic, and according to the broker, customers’ desire for more distance and separate areas will be stronger than ever.

Image sources: dibrova / Shutterstock.com





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