Is New for You?
Is New for You?
Buyers in New York often come to me with a strong idea of what they’re looking for.
They may know what neighborhood they want to live in; they might know how many
bedrooms they need and if they want a condo or a coop. But one purchase scenario many clients don’t take the time to consider is whether or not they want new construction/new development.
In certain NYC neighborhoods (take Williamsburg, for example), the vast majority of available listings right now are in new development, so to ensure you're considering all of your options, it’s crucial to understand if new construction is right for you.
New developments are real estate’s equivalent of the shiny new bike or the latest smartphone. Just like the iPhone 6, with the newest home on the market you’re going to pay a premium to get the latest and greatest.
In fact, in this market you often pay more than just a little extra. Prices for developers are going up rapidly in two key areas—construction materials/labor, and land acquisition. Developers are paying huge sums for land in Downtown Manhattan right now—up to $900 per square foot ($200 to $300 is the historical average). In order for developers to turn a profit, they have to charge the kind of prices we’re seeing. Don’t get me wrong—I’m by no means justifying the higher prices being asked so that developers get paid. But if that’s the only product on the market, it will obviously affect buyers’ pockets. On top of that higher purchase price, you should assume you’ll pay 2 to 2.5% more in closing costs for a new development.
So what do you get for this premium?
The main perk of new construction is being sure you get an apartment that is, well…new. You will have the comfort of knowing that everything is in as immaculate condition as it ever will be. With resale homes, a lot of buyers don’t realize that if you sign the contract, then find a pre-existing scratch or wear and tear, that’s your blemish to inherit and fix. With new construction, you get to walk through the space twice before moving in, point out the littlest problems, and they have to fix it. There’s an emotional aspect to consider here: do you want the most square feet for your money, or the comfort of knowing everything will be new and perfect?
Right now, most new construction on the market is being sold in the development stage, which means you’re buying based on a floor plan and a showroom rather than a walkthrough. With any reasonable developer you can be sure you’ll get what you’re being sold, but you can’t actually see the unit before buying. If you are the type of person who cannot live with uncertainty, do not buy unfinished new construction. I’ve had clients who just didn’t want to wait to see exactly what their actual apartment would look like—the precise ceiling height, the actual room dimensions (versus what is marketed), the many other small details—and I’ve agreed that unfinished new development was not the right choice for them.
For clients who are more laid-back about details and just want that brand new home in the best new building, new development makes sense. It also makes sense for investors who won’t be living in the unit themselves and don’t have as strong a feeling about the details.
There’s no right answer to the question of buying new versus buying a resale. But it’s smart to think about what’s most important to you.