New study dispels myths regarding local condo market.
I think this story is great news for the Austin downtown market. I think it shows that we will not have empty condo buildings that you can see through as you drive by. I think its neat that the study found that the population of downtown dwellers really does blanket neatly accross the entire age spectrum. I am somewhat concerned that the study doesn’t (and can’t) account for the buyers who listed themselves and their unit as “owner occupied” on their contract, who don’t actually plan to live in the buildings themselves. Very few investors will list themselves as such, as the lender requirements for obtaining investors loans are more stringent, and the buyer contract may insert limitations on their ability to lease or sell the property quickly. For most, it is much easier to site “life changes” for their reason to sell, when the project completes – especially when construction often takes the better part of 3 years to deliver. And oftentimes, “life changes” are exactly what it is. In three years, people change jobs, get married, and have children – sometimes planned for, and sometimes not, and thus this situation is unlikely to change. What developers can do – and have done – is demand that no re-sales are allowed until one year after the unit’s original close date, or impose other re-selling restrictions.
So the next question is – will this change our lease market downtown – with all these people needing to lease out their unit before they are offically allowed to sell it. Honestly, I think it will change it, and prices will likely dip in the short term. We have several factors to consider here. First, we need to consider that The Amli (200 units, currently successfully pre-leasing at $3 a foot), and The Monarch (305 units) will collectively be delivering 500 units within the next few months. This lump of supply will likely cause rates to decrease in the short term, as the cost basis on these units for the developer is much lower than that for a single-unit owner, as will be the case for owners in The Shore, or 360 condos. Thus, these apartment buildings will be able to cut prices in order to fill the units with renters. It is also worth while to note that this competitive supply will curb rampant price increases and keep our market more stable than that of other markets in the US right now. This being said, I do believe that once this supply is absorbed into the market – and it looks likely that it will be – that lease prices will remain stable downtown, if not increase.
With 45,000 new residents expected to move to Austin this year, only 1% of these people would need to choose to live downtown to fill these apartment buildings. This doesn’t account for UT students who choose to stay in Austin after college, or people who choose to move to downtown from other areas of town. Given that the downtown lifestyle is becoming more and more desireable, with more places to go, more to do, and more ammenities to make life easier, I believe that the number of people who make the choice to live downtown will only increase as time goes on.
It has proven to be true in other cities – for example San Franscisco – that people are willing to pay dearly for their lifestyle. For example, if you moved to San Fran would you move to the suburbs? Of course not – most people would choose to downsize their space, up-size their monthly payment, and live where they could truly enjoy the lifestyle of the Bay Area, and I think we will see the same thing in Austin, as our community matures. Given all of this, I really believe that the condos and the people who will eventually reside in them are here to stay.
