Today's higher interest rates are designed to put a damper on inflation. They've also put a damper on the sale of co-op and condo apartments in New York and other cities. But for some deep-pocketed buyers, there's a workaround: avoid a mortgage and its high interest payments by buying apartments with cash.
A poster child for this growing trend, according to Crain's, is the Wales, a former hotel at 1295 Madison Ave. that has been converted to a 20-unit luxury condominium. Though apartments start at $4.5 million, all of the 10 closed sales have been for cash. And the Wales is not alone. In the past half-year or so, as interest rates have spiked, the majority of buyers at new developments have been paying in cash, according to data from Corcoran Sunshine Marketing Group, a new-development-focused brokerage.
Adellco, the Wales’s developer, bought the nine-story, prewar Beaux-Arts property at the corner of East 92nd Street in 2018 from DLJ Real Estate Capital Partners for $56.3 million, public records show. Arbor Realty Trust has provided $67 million in financing for the project, which began sales in spring 2021.
“Higher interest rates create upward pressure that affects everybody everywhere,” says Matthew Adell, the founder and president of Adellco. He adds that all seven transactions at a pre-COVID condo offering of his, 27 E. 79th St., which was also aimed at an affluent clientele, were also cash deals.
In the fourth quarter of 2021, 35% of buyers at projects repped by Corcoran Sunshine indicated that they didn’t need mortgage financing when they signed their contract, the firm said. A year later that number had jumped to 66%, and even higher, at 75%, for those snapping up apartments priced at $2 million and above. And the trend shows few signs of abating. Indeed, in the first quarter of this year, 62% of all signed contracts were for deals to be paid in cash, according to the data.
At least at the high end of the market, cash is now the undisputed king.
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