Unique Homes Blog

Renewed Wall Street bonuses are fueling sales of Manhattan penthouses and beachfront estates in the Hamptons.

By Roger Grody

A sustained bull market has buoyed stock prices to nearly pre-financial meltdown levels, and generous bonuses are once again being distributed to Wall Street dealmakers. Those bonuses, coupled with a growing confidence among amateur investors, are driving new sales of Park Avenue townhouses in the city, as well as lavish estates on Long Island.

Diane Johnson of Prudential Douglas Elliman Real Estate confirms that rebounding bonuses and pent-up demand are contributing to a lively Manhattan market already in recovery mode. “In this market, a property that’s priced right or in good condition can go within a few days, often with multiple offers,” reports Johnson. She says trendy downtown neighborhoods such as Chelsea and Tribeca are currently in particular demand.

Diane M. Ramirez, president of Halstead Property, adds that     Gramercy — a historic neighborhood centered around a gated private park that one needs a key to enter — has been very active, and that the tony Upper East Side also is heating up. “We are getting back to a healthy, normal cycle,” says Ramirez, who believes the robust spring market is bolstered slightly by the Wall Street bonuses awarded this time of year.

According to Prudential Douglas Elliman’s published data from the first quarter of 2011, the median luxury sales price in Manhattan was $3.95 million, falling 13.8 percent from the same period last year, but the price per square foot increased 1 percent. Notable is the shrinking inventory, which fell 31.8 percent, and the fact that luxury properties sold two months faster, on average, than in the first quarter of 2010. Johnson believes the decline in inventory is partially attributable to a drop-off in new construction, hopefully poised to resume within the next few years. She has observed that the flight of families to the ’burbs has ceased to be a dominant trend. “Couples no longer pick up and move out to Westchester County after having kids…. Now more people are comfortable staying in the city,” she says. But the price for bona fide luxury in Manhattan — $4 million or more in a market still testing its legs — can be daunting.

Most buyers are local, but out-of-towners long for fashionable pied-à-terres, such as Central Park-view condominiums at the Essex House or Sherry Netherland Hotel. “For many foreign buyers, owning a property in New York is the ultimate proof to friends and colleagues that they are successful,” reports Danielle Grossenbacher of Brown Harris Stevens. She is seeing Europeans, lured by a weak dollar, return to the market after their own financial crisis, and the emergence of Chinese buyers. “New York real estate is still considered one of the safest investments in the world,” says Grossenbacher, who specializes in international clients. Locals, meanwhile, are upgrading to larger apartments, taking advantage of stable prices and low interest rates that are not likely to last forever.

A two-hour drive from Manhattan is the Hamptons, a cluster of elite seaside communities popular with celebrities —  everybody from style maven Martha Stewart to rapper Diddy — as well as Fortune 500 CEOs and Wall Street bonus babies. Lawrence III Corporation develops and sells properties in the Hamptons, and founder Lawrence Citarelli Jr. states that although prices have not begun rising, supply is being absorbed. Wall Street buyers are still ubiquitous, but interest in the Hamptons is now international. “Mr. and Mrs. Jones may still be on the sidelines, but high-net-worth individuals have already started to buy instead of rent,” he says. “You won’t see an opportunity like this again in our lifetime — or your children’s lifetimes,” insists the optimistic Citarelli.

The Corcoran Group Real Estate’s Tim Davis concurs that while prices may not yet be ascending, the Hamptons market definitely has come alive. “It is vastly improved from a couple years ago, and the serious recovery that began last year has followed into this year,” he says. Davis supports his upbeat assessment by noting that several sales in excess of $20 million already have occurred in the first quarter of 2011, and at least a dozen in the $8 million to $12 million range. With bonuses resurging, some cautious Wall Street buyers have returned, adding fuel to a market beginning to sizzle.

Grand estates of American royalty (e.g. Vanderbilts, J.P. Morgan) once dotted the Gold Coast, on Long Island’s northern shores, a place immortalized in F. Scott Fitzgerald’s “The Great Gatsby.” While the Hamptons are almost exclusively a vacation destination, the Gold Coast — just a half-hour train ride to Manhattan — is a primary residence market. Emmett Laffey, principal of Laffey Fine Homes, reports that most luxury buyers are local, often upgrading within the same village. Manhattanites hungry for open space comprise the next largest segment of buyers.

Laffey and associate Maria Babaev illustrate a dramatic market recovery on the Gold Coast: not a single $5 million sale closed in the dark days of the first quarter of 2009, yet 10 closed in the corresponding period of 2011. Emphasizing current value, however, Laffey reminds us that a home selling for $6 million today might have commanded $9 million at the height of the market. “The market is entering a new normal,” says Babaev, who maintains the Gold Coast’s superlative schools, shopping and dining support premium prices. Europeans gravitate to Manhattan, but the greatest international interest in the Gold Coast is from Chinese, Russian and Korean buyers.

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