Manhattan apartment sales declined 23 percent last year as the Dow Jones Industrial Average fell the most since the Great Depression. Now co-operative and condominium prices are dropping as Wall Street firms cut the bonuses that contributed to the property market boom of the past decade.
A 50 percent reduction in bonuses would push down prices by about 24 percent from their peak through mid-2010, said Sam Chandan, chief economist at property research firm Real Estate Economics LLC in New York. That would mark the biggest slide since 1980 when appraiser Miller Samuel Inc. started tracking Manhattan prices.
“This will probably be the worst price correction the city has seen,” said Marisa Di Natale, senior economist at Moody’s Economy.com in West Chester, Pennsylvania.
“If bonuses next year are expected at or below the current level, then prices will slide,” Miller Samuel President Jonathan Miller said.
Sales of Manhattan condominiums and co-ops priced at $10 million or more fell 60 percent in the fourth quarter from a year earlier, the New York City’s Independent Budget Office said. Transactions involving Manhattan apartments valued at $1 million or more dropped 21 percent in the same period.
Apartment prices have dropped 15 percent in Manhattan and may fall another 11 percent to a median of about $820,000 in the next 12 months, said Chandan of Real Estate Economics. If bonuses are eliminated, prices would slump by another 20 percent to 24 percent to a median of $730,000, he said.
“If there’s a shock to income in the city or a shock to employment, that changes the demand side in the short term and prices adjust to that,” Chandan said.