New York City has witnessed a steady increase in rental prices over the past few years, but there are some indications that the trend has begun to slow. Average rental prices dropped at the end of 2012, and while year-over-year numbers are up, the increase is modest compared to years past. Here are some thoughts about what’s in store for the New York City rental market in 2013.
More Buyers Means Less Renters
Low interest rates and affordable housing prices have enticed many renters to finally make the plunge into the housing market. Many more people have decided that now is the time to purchase, and the rental market has certainly taken a hit as a result. However, qualifying for a purchase has become increasingly difficult in our current economic state, many who would like to buy may not be able to. So while record numbers of people are turning away from the rental market, they may eventually have to turn back because they don’t qualify for a home loan. It remains to be seen how much this will affect the rental market in 2013.
Manhattanites Turning to the Boroughs
Median rental prices in Manhattan verses the other boroughs in the last year has compressed slightly. Many of those living in Manhattan have decided to relocate to places such as Brooklyn and Queens in search of more affordable prices. Some experts believe this points to the idea of “renter fatigue” where the rental market cannot continue to grow at such a rapid rate. Many renters have just had enough and are ready to walk away, move towards a purchase, or relocate to a different, more affordable area.
Several new residential buildings have been developed in Downtown Brooklyn, Long Island City and Astoria, Queens. Most of these buildings have performed extremely well, and renters are discovering that luxury properties in these neighborhoods can go for 20 to 30 percent less than their counterparts in Manhattan, making them very attractive.
Different Neighborhoods Experiencing Different Trends
Not all Manhattan neighborhoods are performing the same in the rental market, and these trends could continue into 2013. For example, Midtown West had the biggest drop in prices in all apartment sizes in 2012, while the Upper East Side had the biggest jump in the number of apartments available. On the flip side, Downtown has continued to attract renters and has performed very well. Soho, Tribeca and the West Village remain hot rental neighborhoods, largely due to the overall lack of inventory. These areas don’t have many of the high-rises that have been developed in other areas of the city, but this is also part of their appeal.
Luxury Market Still Tight
The trends in the rental market are not felt equally across the board. Unlike the middle and lower-end markets, the luxury rental market continues to be tight. This includes properties that are three bedrooms or more because they are very hard to come by in the city. Rents remain steady for these types of units. In addition, there has been a slowdown in new luxury developments, so there just isn’t the same kind of inventory for luxury apartments.