By Chris Ragland  - (9/29/2007)

One of the questions I keep hearing from a lot of my buyers is, “When will the supply exceed the demand in the downtown Austin condo market?” And the honest truth is no one is sure, or if it will. But there are a lot of factors in place that people are not considering. 

Perhaps the largest hidden factor that most consumers and even lenders and realtors are not considering is the cost control that the City of Austin exhibits over developers in the downtown area. I am not talking about hard costs like concrete and steel which are also climbing, or the permitting costs, or even the hard dollars the City will ask for to use for “general improvement” but the infrastructure charges. For example, let’s say you wanted to develop a tower in the parking lot on West between 5^th and 6^th street; A great location for a new tower. The problem is, the City has already upgraded and installed new infrastructure for other approved and planned building in that area. For you to bring a new tower into the equation throws everything off. The City combats this with higher infrastructure costs. For your new tower, the cost of infrastructure such as water, waist, and power could be many times more expensive than the guy across the street that had City approval years prior.

This is an example of one inventory control that people are not taking into consideration. There are many other factors governing the Downtown Austin Condo market that I think people are missing such as the local economy, city incentives, improved safety, State Legislature Offices, and new business.

Purchasing real estate always carries a degree of risk. You have to decide for yourself if you are willing to take that risk in exchange for the actual or perceived reward. As a buyer you have to remember, caveat emptor, “let the buyer beware”.