Smaller bonus checks across Wall Street indicate New York City luxury real-estate prices may be on the way down.
The CHART OF THE DAY shows the relationship between average Wall Street annual bonuses, lagged two years, and the average price for luxury condos and co-ops in New York City, based on data from the Office of the New York State Comptroller and real- estate appraiser Miller Samuel Inc.
The average price for a luxury co-op or condo in New York fell to $5.49 million in 2011 from a peak of $6.33 million in 2008, according to data compiled by Miller Samuel, which defines “luxury” homes as those falling within the top 10 percent of transactions by price. The average Wall Street bonus fell 13 percent last year to $121,150, the lowest since 2008, and almost 40 percent less than the $191,360 reached in 2006, according to projections by New York State Comptroller Thomas DiNapoli.
Declining bonuses in 2011 may bode poorly for luxury real- estate prices this year and next, according to Miller Samuel president Jonathan Miller, noting a lag between lower compensation and sales and prices. “People are making decisions a year or more down the road because they’re getting their deferred cash,” he said. “We may see a little weakness in 2012,” and “next year could be weaker based on this trend of lower compensation.”
Wall Street firms trimmed 2011 discretionary pay as investment-banking and trading revenues slumped. At Goldman Sachs Group Inc. and Barclays Capital, the cuts were at least 25 percent. Morgan Stanley capped cash bonuses at $125,000, and Deutsche Bank AG increased the percentage of deferred pay.
Lower compensation for bankers means “the best case scenario for 2012 is more of the same,” Miller said. “The Manhattan housing market specifically remains one of the best in the country -- but that’s a relative statement.”