Conventional wisdom in the New York real estate world holds that certain types of buyers prefer condominiums over co-ops. They include foreign buyers, those seeking pieds-a-terre, and those unthrilled with the extensive financial and personal disclosures required by co-op boards.
On the other side of the transaction, that same wisdom holds that co-op boards are much less flexible than condo boards when it comes to prospective buyers, holding a hard line on who can purchase shares, and how. This approach may be undergoing a change.
What’s Driving the Change?
Two major factors are affecting how certain buyers, those mentioned above, are approaching the co-op vs. condo question. The first is a general attitudinal shift following the pandemic, and the second is the reality of higher interest rates.
Erin Boisson Aries, a broker with Douglas Elliman explains the current market. “Since the pandemic, lifestyles have changed drastically,” she says. “More of my clients are shedding the notion of a primary residence and instead traveling between homes across the country and the world. Others have left the city because of hybrid work and are now realizing they need a foothold here - something easy and private where they can come and go as they please. And I’m also seeing international buyers coming back in full force, shopping for a pied-a-terre.”
There has been a shift in mindset, and “Flexibility is key right now” - and that means on both sides of the equation. The type of buyer who might have been turned off by co-op boards’ stringent review requirements pre-pandemic are now embracing the opportunity - with buildings whose boards have become more flexible and open in order to attract more such buyers.
“Even the most rigorous co-ops are now looking for ways to soften some of the more draconian restrictions in order to compete in today’s market and with condos,” says Boisson Aries. “When a co-op building allows pied-a-terre, you know the application will be less arduous and more amenable to international buyers. ”
Another factor, notes Boisson Aries, is that just as some co-ops are relaxing their rules to position themselves more in line with condos, many condos are beginning to adopt rules for new purchasers similar to those most of us associate with co-ops. Perhaps this convergence is a natural thing in a developing market.
“I’m finding that some condos are starting to adapt elements of the co-op application process,” says Boisson Aries. “Although there’s no board interview, the application can be just as rigorous”
It’s not so much a matter of buyers shifting from condos to co-ops, Boisson Aries explains. The message in the current market is that whether to offset higher rates or to be strategic in a shifting economy, the desire for value is driving buyers to think outside the box and consider opportunities that otherwise might not be their first liking. The savviest buyers are adaptable, adjusting their strategies to align with the current economy and their changing lifestyle needs while also getting what they want, where they want, for the price they want. Co-op boards must do the same to be competitive in a buyer demographic traditionally more attracted to condos.
“Now that interest rate increases and inflation are finally leveling off,” says Boisson Aires, “we should start to see more confidence from rate-sensitive buyers. But I think the emphasis on value is here to stay and will continue to bode well for the co-op market.”