Recently, in New York City there has been a development boom of luxury high-rise buildings. In the aftermath of the 2008 recession developers and buyers were eager to boost the real estate market, however, developers outnumbered the buyers, and today there are too many empty luxury buildings.
What does this mean for renters this fall? Landlords and developers are continuing the trend of incentivizing new renters with concessions, such as two months free rent or no deposits. Although landlords are unwilling to cut rent prices, the median rent for Manhattan apartments with a doorman (without the concessions) have actually decreased over the past year from $3,899 to $3,875. Manhattan properties without a doorman however have seen a slight increase over the same time period, from $2,932 to $3,000. These new luxury buildings without doorman tend to have extra costs associated due to location and the technology infrastructure implemented to maintain building security.
The real estate market, although still strong, will likely see a dip in luxury rental prices since landlord concessions are not sustainable for the long term. Commentator, Jonathan Miller, explains that:
“What’s happening is that the concessions for about the last 10 months have been unusually high, but they’re not steadily climbing … I think the reason for that is that where they’re sitting is this threshold where, if it’s higher than that, then the tenants are concerned that if the concessions are removed [when it comes time for lease] renewal, they won’t be able to afford the apartment.”
Therefore, it is predicted that the rent for these luxury developments will eventually decrease to accommodate the needs of the market. However, for the time being, it is a renter’s market for luxury properties, especially in areas where there is an over saturated market. As we discussed in our previous blog, condos and luxury rental developers need to adapt to this new market before empty units lead to a loss of profits (read the blog here).
As plans for the L train shut down in April 2019 move forward, condo sale prices in Williamsburg have dropped by 13 percent and 43 percent more condos were sold from April to June 2016 compared to 2015. Although these residents will not be impacted from the train shut down until 2019, there has already been a noticeable shift in Williamsburg’s real estate market. Luckily it is now a good time for buyers looking to relocate to Manhattan.
In today’s economy, where interest rates are at a low, it is a good time for potential buyers to take out a mortgage to purchase their next home. Robbie Gendels, VP and loan officer at National Cooperative Bank, told Brick Underground that currently rates for co-ops and condos in the City are at 3.875 percent. This is ideal for potential buyers who need to take out a mortgage, but as the economy strengthens interest rates will rise, therefore it is key to buy now.