Central Austin condo/townhome market[/caption]
There were 1,178 Austin-area condos and townhomes sold between January and May, a double-digit percentage decrease compared with the same time last year, according to the Texas A&M University Real Estate Center, which conducted the mid-year report. Roughly 43 percent of those units were sold in Central Austin, based on sales figures provided by the Austin Board of Realtors.
But the sales figures do not take into account new condo projects, said Perry Lorenz, principal of Constructive Ventures, the company that is partnering with Aspen Heights to develop The Independent, a 58-story, 370-unit condo tower expected to break ground in downtown Austin near the end of the year. The building will be the city’s tallest once complete, and it is virtually fully booked despite not opening until 2017, according to Lorenz.
“A significant number of these units are developer-sold and never hit the market,” he said. “So you’ve got to take everything you hear with a grain of salt.”
The vast majority—nearly 80 percent—of The Independent reservation holders have Austin addresses, Lorenz said, and roughly one-quarter already live downtown.
“These are by and large Austin people,” he said. “Out-of-staters are not driving this.”
Similarly, a new 38-unit condo complex in South Austin called J. Bouldin Residences—slated to open next year—is already mostly booked just weeks after units became available at the former St. Ignatius Martyr Catholic Church site, according to Jonathan McEowen, director of sales for The Brandon Miller Group, a real estate consulting firm running the redevelopment project. Most of the initial interest has come from surrounding residents wishing to upgrade condos or relocate from single-family homes, he said.
“I think the decrease in the [Real Estate Center] report has a lot to do with new products coming on the market, because I haven’t noticed a decrease in traffic—I’ve only seen an increase,” McEowen said.
Demand not dying
Despite the reported sales decline, local condo prices are still up 4 percent compared with early 2014, according to the Real Estate Center. Condos are also spending less time on the market—43 days—despite a 2 percent increase in active listings, the report states.
A single-day snapshot of Austin’s active real estate listings, recorded June 30, showed condos make up 35.1 percent of all Central Austin home listings compared with 18.2 percent citywide. There were also more listings south of Lady Bird Lake—in 78704—than downtown Austin—in 78701, and the two ZIP codes combined to make up more than half of the Central Austin condo market.
However, The Independent is among multiple downtown condo developments not represented on active listings.
The tower is part of the Green Water Treatment Plant redevelopment site, which is very close to the new Austin Proper Residences, a hotel project that will include 100 condo units. The Independent also falls under the same district as the Seaholm Residences, a former power plant site that has all 280 condo units under contract.
Those projects are the result of city-led efforts of nearly 20 years to revitalize downtown’s residential housing market, said Fred Evins, redevelopment project manager for the city’s Economic Development Department.
Bank financing, and not city desire, dictated whether these projects ended up being condos or apartments, he said. The Seaholm Residences project, for example, was originally slated to become condos before the Great Recession forced developers to switch to apartments, Evins said, only to switch again to condos before breaking ground in 2013.
“Our preference is to have a healthy mix of housing in downtown as well as all over town,” Evins said. “A broad mix of residential types can appeal to different demographic types and economic income levels.”
But in downtown Austin, where condos make up nearly all housing, less than 4 percent of residents are age 18 or younger, according to U.S. Census data, but children make up 21.9 percent of the city’s overall population. In addition, Census data reveals one in five downtown residents, or double the citywide average, make $200,000 or more annually.
“Very rarely do I have anybody with children that’s looking for condominiums,” Austin realtor Joe Bryson said. “That’s when they go to the ‘burbs.”
Bryson, perhaps better known by his marketing alter-ego Condo Joe, said he has analyzed more than 500 area condo complexes since 1990 to review trends in the Austin sales market.
Condo sales are down slightly so far this year, according to his data, despite the median condo price rising to $222,000. That value appreciation is most evident among older condo types, he said.
The more affordable condo units become, the more likely families are to invest in them, said Patty Sprinkle, the south central representative for advocacy group Austin Neighborhoods Council. ANC leadership does not report having any conflicts with neighborhood condo development, with Sprinkle even pointing to one project in which developers worked with her Galindo neighborhood to make The Denizen Condominiums more compatible.
“That type of living doesn’t prohibit families—families live in that type of housing all the time,” Sprinkle said. “It’s a way of life, so I don’t think it’s so much about the structure, if you will, as how affordable it is.”
Steep value increases are unlikely to continue despite double-digit percentage returns in recent years, Bryson warns, and the market could become more favorable for buyers when condo prices level off, he said.
“A lot of sellers are going to overshoot the market in the not-so-distant future and expect to keep that rate of appreciation,” he said. “That will cause properties to remain on the market longer. We could see that later this year, and when properties are on the market too long, sellers start reducing those prices. It’s a kind of market correction.”
Even high-rise downtown projects such as The Independent try to provide a broad range of unit sizes—from 675 square feet up to 3,800 square feet—to accommodate all types of tenants, said Lorenz, who also developed the downtown Spring Condominium. Project developers also pay $2.5 million upfront to the city’s affordable housing trust fund, to which 40 percent of the site’s ongoing property taxes will also go.
During the next 30 years, redevelopment projects in the former Green Water Treatment Plant site will generate approximately $65 million for affordable housing projects, Evins said. Many projects will be built near—rather than inside—downtown Austin to stretch every dollar.
“It’s a tug of war. We want affordable housing to go downtown because that gives us that housing diversity we need, but with finite resources is downtown really the best place to invest in?” Evins said.
Camille Belcher with First Service Residential, the firm that manages the city’s tallest existing building, The Austonian, said there is still strong demand for market-rate downtown condo units. For example, The Austonian opened around the same time as The W Residences Austin and Four Seasons Residences, she said, yet all three projects instantly sold out.
“I think they feed on each other,” Belcher said. “There’s plenty of business to go around for everybody.”