It has gripped almost the entire United States, from Des Moines, Iowa, to Daytona Beach, Florida, but only now is the slump in America’s residential property market reaching the very top of the tree – Manhattan.

Finally, almost belatedly, the few square miles of upmarket central New York real estate is beginning to suffer the impact of this summer’s credit crisis. Wall Street bankers are delaying the purchase of new apartments, keenly aware that the country sits on the brink of recession, and boom in the Big Apple is showing signs of abating.

The rest of the US was already feeling the chill of a cooling housing market, with property prices suffering their worst slowdown for 16 years, but Manhattan had remained resilient, buoyed by surging demand and limited supply. However, according to one of the leading experts on the Manhattan real estate market - Gregory Hymes, chief economist at the property company Brown Harris Stevens – although residential property prices hit a record high in the third quarter of the year, estate agents are beginning to see a slowdown in activity as Wall Street bankers guard their bonuses.

Mr Hymes said: “People do not like to buy in uncertain times. Some of the problems arising from the stock market turbulence in the summer will be resolved shortly. But some of the problems will take years to unravel.

“These are unique circumstances. Usually by this time of year we have an idea how big the Wall Street bonuses are, but at the moment it is very difficult to call. Even if bonuses fall by 10-15 per cent on what they were last year, they will still be the second-highest on record – but what we are seeing that is different is that there is real cautiousness about spending them.”

Mr Hymes also said that present average property prices on Manhattan Island had been distorted by the sale of two exclusive blocks of apartments, whose prices mark them out as among the most expensive real estate in America. During the third quarter of the year, apartments at 15 Central Park West and The Plaza – both overlooking Central Park – came on to the market, lifting the average Manhattan property price with them.

During the third quarter of the year, the average sale price for a Manhattan apartment reached $1.3 million (£640,000), 26 per cent higher than for the same period in 2006. Larger apartments posted the sharpest price increase during the period, with the average price for an apartment with at least four bedrooms rising 19 per cent to $6.58 million.

Across America, the effects of the credit crunch and the crisis affecting the sub-prime lending market have been getting more dramatic. While different states sank into a property recession at different times and at different rates, some states, such as California, Arizona and Florida, have seen prices fall by as much as 40 per cent in two years. The states that suffered the sharpest falls were the same states that experienced the biggest property boom beforehand.

Last week President Bush sought to limit the number of Americans who look likely to fall behind with their mortgage payments and lose their homes by devising a plan with lenders to freeze the adjustable interest rate charged on a number of home loans.

Washington’s bailout plan has come too late for many. In Stockton, California, one in thirty-one households went into the foreclosure process in the third quarter of the year, according to RealtyTrac, with the number of homes falling more than 30 days into arrears with their mortgage up 30 per cent nationally during the period.

Cheap at the price

—Island of Manhattan was first mapped by Henry Hudson, a British employee of the Dutch East India Company, in 1609, sailing up the river that now bears his name

—A permanent European presence was established from 1624 with a Dutch fur trading centre on Governors Island, at the foot of Manhattan. The Dutch built a citadel on the island – called Fort Amsterdam – in 1625, seen as the birthdate of New York City

—Manhattan was bought by the Dutch from Native Americans in 1626 in exchange for trade goods, thought to have been worth $24

Big Apple

$1.3m Average sale price for flat in Manhattan (up 26 per cent from year before)
$1,804 Average price per sq ft of a fourbed apartment ($1,566 in the third quarter of last year)

Source: Brown Harris Stevens. Numbers relate to third quarter 2007

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