Developers of luxury condominium towers in Back Bay, downtown Boston and the Seaport District are delivering nearly 600 units to a market that saw a 13 percent drop in sales volume last year. Closings of more than 300 residential condominiums will begin in April at The Millennium Residences at Winthrop Center. Image courtesy of MP Boston

Condominium sales volume in Boston’s urban core plummeted in the second half of 2022 as rising mortgage rates took a bigger bite out of buyers’ purchasing power. 

Median sales prices have remained resilient, in a reflection of Boston’s continuing appeal and a restrained construction pace that’s staved off a glut of listings. Conditions could change rapidly, however, as a trio of ultra-luxury condo towers welcome residents in the first half of 2023. 

“It’s just short of 600 brand-new units, and they’re all gunning for the same luxury buyer,” said Andrew Haigney, principal broker at Boston-based Batterymarch Group. 

In the Back Bay, South End and other downtown neighborhoods, condo sales volume dropped nearly 13 percent in 2022, according to transaction data compiled by The Warren Group, publisher of Banker & Tradesman. But median prices still rose nearly 10 percent for the full year to $950,000. 

Part of the reason, brokers say, is the prevalence of cash transactions at the high end of the market. At the same time, interest rates on fixed-rate 30-year mortgages topping 6 percent have weeded out some of the lower-tier buyers, said Sean Persson, director of residential brokerage at The Senné Co. in Boston. 

“The buyer pool has decreased in the past six months,” Persson said. “We’re not seeing a ton of the first-time homeowners, and the price points that we’re seeing that have the most activity are a little bit higher than anticipated.” 

Cambridge’s condo market had similar sales and price trends in 2022. Sales volume declined 14 percent to 708, while median prices increased 6 percent to $865,000, according to Warren Group data. 

Buyers looking for price concessions can find some overlooked value in traditional high-end properties in neighborhoods like Back Bay, Haigney said, as well as still-unsold units at the previous wave of new developments such as The Archer in Beacon Hill and One Dalton. The latter property which opened in mid-2019 still had 27 unsold units in late 2022. 

“There was a steady decline in comfort level with the economic climate,” said Sue Hawkes, managing director at The Collaborative Cos. in Boston. “That certainly made a difference with people who were optional buyers and had discretionary decisions.” 

The Raffles Boston Back Bay Hotel & Residences has pre-sold over 70 percent of units at average prices of $2,800 per square foot, according to a brokerage report. Image courtesy of The Architectural Team

Luxe Club Gets Three New Members 

Each of the three new towers changing the skyline from Back Bay to the waterfront occupies a distinct niche within the urban market. 

The Raffles Back Bay Hotel and Residences, a hybrid hotel and 146-unit condo tower in Back Bay, touts its extensive food service program, including six bars and restaurants, and two floors of pied-a-terre-style units. 

In the Financial District, developer MP Boston took advantage of the huge floor plates at its Winthrop Center tower to maximize the amenity options, ranging from a 6,000-square-foot pet spa to a meditative “Earth Room” that blocks out intrusive WiFi and data signals and forces residents to put down their phones. 

And the St. Regis Residences, Boston at 150 Seaport Blvd. touts units equipped with automated floor-to-ceiling glass doors opening onto terraces with panoramic harbor views. Since closings began in November, units have sold for $1.7 million to $13 million. 

Closings will begin in April at the Millennium Residences at Winthrop Center, which includes 321 condos on the 35th through 62nd floors. 

Scheduled to open in early summer, Raffles has pre-sold over 70 percent of its units at average prices of $2,800 per square foot, according to a report by The Collaborative Cos., which is the exclusive broker. 

A Pause or Permanent Shift for Construction? 

But after Raffles, the development pipeline for marquee projects starts to slow considerably, suggesting that any supply-demand imbalance could be short-lived. 

Hines’ South Station tower will deliver 166 Ritz-Carlton-branded condos in 2025. And Boston Global Investors has approvals for 231 condos at its $525 million Motor Mart Garage redevelopment on Stuart Street, but hasn’t announced a groundbreaking yet. 

Steve Adams

Some developers have warned that Boston Mayor Michelle Wu’s proposed increases in linkage fees and affordable unit percentages in new projects would make it nearly impossible to obtain financing to build for-sale housing units in many neighborhoods. 

Boston-based developer Ad Meloria, which received approval for 155 condos and 122 apartments at 1717 Hyde Park Ave. in 2020, last week proposed switching the project to all rentals. 

“We’re going to have continued constrained supply, and that dearth of product will keep prices higher than it would have been,” Hawkes said.