In Downtown Boston Lack of Condominium Inventory is the issue

Three weeks into the New Year there are not enough closed transactions to formulate an opinion about the market.  However we can state that we are off to a slow start as we were at this time last year.  One data point that has our attention is available inventory, or lack of inventory to be precise. 

As part of our Weekly Market Watch, a copy of which is available to our clients via email (request here), Otis & Ahearn tracks the inventory of available properties in a sample of 12 Full Service buildings in Downtown Boston.  The trend in this sample is indicative of the market as a whole, inventory in decreasing.  In June 2009 the available inventory was 91 condominiums, by year-end 2009 there were 60 available. 

Throughout 2010 and ’11 the total available inventory went down to 55, YE 2010 and to 38 as of the 20th of January 2012.  Over the past two and one half years the market has absorbed the inventory in these buildings and there is no new inventory being created to replace it.
Looking to the broader Downtown Boston market, the inventory has dropped 20% from 845 properties available January 20th 2011, to 677 on January 20th 2012.  All the while transactions per month have increased by 25 from 222/month in 2011 to 226/month in 2012.  This increase in transactions and concurrent reduction in available inventory has reduced the month’s supply of inventory to levels last seen in 2004 and 2005.  Both those years saw robust appreciation in average and median sales prices for condominiums.  With inventory low, no new inventory under construction and additional market factors, including historically low mortgage rates, expect continued upward pressure on prices throughout 2012.

The assessed value of Boston Condo’s has increased

Assessed values of Boston condominiums are higher this fiscal year as compared to last fiscal year.  Confirmation of the stability of Boston real property and the growth of the condominium segment, came this week in a report by the Boston Municipal Research Bureau, a fiscal watchdog group funded by leading businesses and non-profit organizations.  While the value of all real property dipped slightly, by one half of one percent, the value of condominiums increased by 3.6% according to the report.  The strong showing is attributed to the increase in the number of luxury condominiums, specifically in the Downtown and Seaport neighborhoods.
The report goes on to highlight the importance of new development including residential housing to the City of Boston.  The operating budget for the city is funded, almost exclusively through property taxes.  Over fifty percent of the property in Boston is either owned by the Federal, State or City Government, hospitals, universities or non-profits organization such as Hospitals and Universities.  As a result, the tax burden for city service falls upon less than half the property owners.  For the city to grow the budget and expand services, it must increase the taxable property base.  We see the direct impact of development, as noted in the Boston Globe article, where new and higher value is being added to Boston by properties like Atlantic Wharf and 1 Marina Park.  Together these two properties added $123.4 million to the tax rolls.