Condo Glut Clouds 2009 Fiscal Forecasting
SALISBURY - The popping of the real estate bubble isn’t going to have much effect on local property valuations or tax revenues this fiscal year, according to the town assessor. But fiscal 2009, which starts July 1, 2008, could be a whole different story.
Assessor Cheryl Gillespie said that’s because the valuations used to compute fiscal 2008’s tax rates were based on real-estate sales for 2006, before the national slump in housing sales and decline in prices. Locally, beach, ocean and riverfront properties appreciated nicely that year, she said, and other residential property and vacant land inland also appreciated or at least remained stable. Commercial property values went up as well.
But fiscal 2009’s valuations will be determined by 2007’s real-estate transactions, she noted in response to a question about the real-estate market from Selectman Fred Knowles earlier this week, and will start to reflect the decline in sales and prices.
Condominiums were the one part of the real estate market where things weren’t quite as bright in 2006, however.
“The condo market was stable at the beginning of 2006,” Gillespie said. “My final evaluation may show some depreciation because we have such an abundant supply of condos.”
A number of condominium projects - many large Chapter 40B developments that include an allotment of “affordable” units - began entering the market in 2006, and even more came on the market in 2007.
The poor condo market is to blame for the recent auction of the site of the first million-dollar-per-unit luxury condo project approved for Salisbury Beach Center, said 2 Broadway’s former owner Peter Carbone.
“Everything in this business is about timing,” Carbone said at last week’s public auction held by Carbone’s mortgage holder, Provident Bank.
Carbone needed to pre-sell at least eight condos priced at from $500,000 to $1 million to get the financing package to build, he said. After spending a year beating the bushes, he only had pre-sell agreements on four. That wasn’t enough to get the five-story, 24-unit, residential/commercial project built or maintain the $1.4 million mortgage on the Broadway lot he paid $1.5 million for in 2006.
What Gillespie is seeing this year, she said, is that to sell condo projects, some developers are adding perks and holding the line on their selling prices. As a result, selling prices aren’t necessarily coming down, but developers are giving a bit more for the price. For example, she said, developers might be finishing off the basements of properties now, whereas when the market was better, basements were unfinished.
Still, Gillespie remains positive about Salisbury’s real estate. She expects beach, ocean and riverfront properties still to show an appreciation in value this year, and other property to remain stable.