The above graphs come courtesy of Laura Ahmes-Gollinger, vice president of real estate marketing firm the Collaborative Companies. They're quite simple, really, yet profound. They show condo sales and apartment leases in the South End at different price points from late November 2013 to late November 2014. You'll notice right away that sales and leases drop off at a certain point.
Ahmes-Gollinger explains: "[T]here were 628 sales in the last year in the South End (11/18/2014 – 11/18/2015). Of which, 41 percent sold at a price of $800,000 or higher. After pricing reached the $1 million dollar price point, demand begins to decrease. This erosion of demand decreases further above $1.4M. ... [T]he take-away is that the market can only absorb so many high-priced units at a given time (both for-sale and for rent)."
Right now in downtown Boston, the average sales price of a condo is likely at or above $1,000,000. And there are many more such higher-priced units going up (ditto for higher-priced apartments). In fact, that seems to be all that's being developed in Boston's core: Pricier spreads. This is understandable: Demand is high, people want to live downtown, construction financing is cheap, not to mention mortgage rates slumbering at historic lows.
Too many of these pricier pads, however, and you might soon see a glut. And supply gluts, of course, tend to lead to price decreases. We are already witnessing such dynamics in the luxury apartment market, where tenant incentives are the norm as long-planned projects ease onto a market that doesn't necessarily want them anymore. At least not at their current asking rents. Might the luxury condo market follow?
· Average Downtown Boston Condo Price Nears $1M [Curbed Boston]
· Manhattanization of Boston Real Estate Continues Unabated [Curbed Boston]
· New Eastie Development Offering Up to Three Months Free [Curbed Boston]