The Question That Will Always Be With Us: Co-op or Condo?

It’s one of those arguments that will always be with us. Cat or dog? Red or white? Co-op or condo? The StreetEasy blog points out that condos tend to be both more expensive and more desirable than similarly appointed co-ops. Here are 5 big reasons for this seemingly counterintuitive fact of New York City life: 

Supply. Co-ops outnumber condos by about 3 to 1: 74 percent of the city’s privately owned apartments are co-ops, while only 26 percent are condos. All buildings constructed before the 1980s were co-ops, and then there was a major boom in conversions from rentals to co-ops in the 1980s, when Habitat magazine came on the scene. So while condo development currently is moving at a feverish pace, co-ops are likely to continue to dominate the supply for decades to come. And, as we all know from Economics 101, a glut of supply tends to drive down price. 

Demand. The demand for condos extends beyond the local market. In fact, buyers of New York condos now come from all over the world, while locals tend to seek out co-ops. These international buyers tend to see condos as a safe investment and a good place to protect cash from the volatility associated with their respective currencies, markets, and governments. Over the past decade, foreign buyers have been flooding the condo market, often with all-cash deals. 

Sublet Policies. Most co-ops forbid shareholders from renting out their apartments unless they’ve lived in them for a minimum period of time, usually two years, and they limit how long shareholders can rent out their apartment within a five-year time frame. Given these restrictions, co-ops are not ideal for someone looking for an investment property with the option to sublet. 

Age. Prospective buyers are often willing to pay a premium for new development. Since condos tend to be newer, they tend to command higher prices than comparably sized co-ops. While it’s true that co-op values have also increased during the recent real-estate boom, their values tend not to surpass those of condos. 

Liquidity. Co-op boards have tremendous power, and they tend to impose greater restrictions on transactions. Those restrictions can determine the amount of financing a buyer can receive, and even stretch to the judgment of a buyer’s character during the co-op board interview. Many co-ops are now trying to behave more like condos to improve their liquidity and ultimately their resale values. Condo boards, on the other hand, only have the right of first refusal when an application for purchase is received. It’s a lot simpler than a co-op transaction.