NEW YORK CITY — Luxury co-op sales have plummeted over the past three years while luxury condo sales remain steady, a new real estate report has found.
Despite there being far more co-ops than condos in New York City — more than 268,000 compared to more than 112,000, respectively — co-op sales have dropped by 30 percent since 2014, from 209 sales that year to 148 sales last year. Meanwhile, luxury condo sales remained close to 300 per year, the study by private brokerage Stribling found.
Another report released by the Real Estate Board of New York found that total co-op sales, including those below $5 million, fell 17 percent — from 503 sales during the last quarter of 2015 to 417 during the same period in 2016. And the average price for a co-op in the neighborhood dropped by 2 percent, to $1,591,000, during that same time period.
Experts blame co-ops' cumbersome application process and rules for driving away luxury buyers — defined as property seekers looking to spend at $5 million or more.
In addition, there are significantly less co-ops coming onto the market. Only 11 new co-ops were created since 2014 — compared to roughly 630 new condos during that same period, according to the state Attorney General's office.
There have been 29 luxury co-op contracts signed so far in 2017, a drop from the 32 recorded during the same time period last year, according to the report.
DNAinfo has broken down the pros and cons of co-ops and condos:
Co-ops Offer Value and Stability, But Are More Difficult to Get Approved
Co-ops — apartment buildings that give each resident an interest in the entire building and a lease, contract or stock share enabling the owner to live in a unit — have been historically concentrated in wealthier neighborhoods like the Upper East and Upper West Sides, particularly along Fifth Avenue and Central Park West.
Over time, co-ops started forming — and offering lower prices — in other neighborhoods, including on stretches like West End Avenue and Riverside Drive. By the mid-1980s, there were co-op buildings all over the city that catered to different segments of the population, according to Marc Luxemburg of Gallet Dreyer Berkey LLP, who represents co-op and condo buildings in the city as an attorney for the Council of New York Cooperatives and Condominiums.
Luxemburg — who has also served as president on his own co-op board — said the biggest advantage to owning a co-op share is the ability to control with whom you live in the building.
Co-op boards are very strict about who resides in their buildings, which they accomplish through an intensive review, including poring over applicants' financial statements and doing in-person interviews. Each building's application process is different, but the boards all look at roughly the same information, including balance sheets, income statements and a list of assets.
"The boards have the right to decide who is going to share their home," Luxemburg explained. "Boards can't discriminate against people in various categories because of civil rights laws, but they make sure potential owners are financially responsible and compatible for the other unit owners. They need verifiable finances so they know they can help sustain the co-op."
Co-op shareholders pay monthly maintenance fees to cover building expenses and upkeep.
Co-ops also usually have strict rules about renting out units. Most don't allow it, Luxemburg noted, so tenants looking for an investment that will add some extra income should look elsewhere.
"A lot of condos are owned by investors or people who have no intention of making it a residence," he said. "It's just another place to stay and not really a home."
Stribling's experts agree, saying that co-ops tend to foster closer relationships among neighbors and offer a more stable, regulated environment.
Condos Offer More Amenities and Easier Ownership
Condo owners have much more control over their apartments than co-op owners, and can choose to do with it what they wish, including leasing it to another person without co-op permission. Each unit gets its own tax bill from the city and its owners must pay monthly common charges for maintenance.
While co-ops still outnumber the amount of condos in the city, most new construction tends to be condo, like a planned TriBeCa tower at 111 Murray St.
The tower — whose slogan is "modernism lives in TriBeCa" — will include a hair blowout salon, a Turkish bath, a fitness center with a 75-foot lap pool, and units that range from $1.52 million for a studio to $18.9 million for a five-bedroom apartment.
Stribling's report notes that buyers find new condo developments appealing because the approval process is considerably less invasive and time-consuming than with a co-op board.
While condo boards ask applicants for much of the same information as co-ops, they're less strict about who they sell to. By law, condo boards cannot turn down prospective buyers, but they do have the right of first refusal, according to Luxemburg.
"Brokers like that," he said. "They don’t like to have people turned down, so brokers will tell you that condos are better than co-ops."
Condos are also a good investment, Luxemburg added.
"There's a belief that condos bring more money per square foot, and that, while a condo building is designed for residences, it can be used as an investment building," he said. "You can buy condos for the purpose of renting them... they can be used as profit-making vehicles."
So Which Is Better?
Experts and New Yorkers all agree that the approval process at co-ops can be too much to deal with, which is why more people are tipping toward condos.
"Co-ops come with a lot of baggage, which is why tenants need deeper pockets," Corinne Pulitzer, an agent for Douglas Elliman who specializes in deals on the Upper East Side, told DNAinfo New York last month.
Stribling's report noted that as buyers shift their requirements to more modern amenities with increased privacy, co-op boards will have to figure out what concessions they are willing to make to "lure would-be buyers back to the co-op form of ownership." These include tweaking the application process, time limits for renovations and for summer work, and the costly nature of repairs that many units require — issues that are often not a part of condo ownership.
"Looking ahead in 2017, we expect the share of co-op sales, which are predominantly uptown to continue to decline relative to condo resales and new development, concentrated downtown," the study notes. "There are three reasons for this: condos offer buyers a plethora of amenities and services, the trend in favor of contemporary style and new construction, and buyers' preference to live downtown."
Despite this, Stribling believes that co-ops will be viewed as a better value for the space in the coming years because the cost of condos will continue to skyrocket and will be mostly concentrated in the more expensive Downtown market.