The combination of New York City’s slow sales market and brisk rental market is encouraging some sellers to become landlords.
Rents rose across all price indicators last month, according to Douglas Elliman’s December 2019 rental market report for Manhattan, Brooklyn, and Queens, fueled by the continued weakness in the sales market.
Median rents were up for Manhattan and Brooklyn significantly. In Manhattan, the median rental price rose by 6 percent to $3,499, and in Brooklyn, the median rental price was up 9.2 percent to $2,991.
There was an even more pronounced 10 percent jump in Brooklyn’s net effective rent (which factors in concessions like free months).
Would-be buyers, anxious about the cap on state and local tax deductions, a new hike for the mansion tax, the economy, and now the upcoming election are taking a wait-and-see attitude in hopes that prices will fall further and have been parking themselves in rentals for several quarters.
Now sellers (who can afford to) are also playing the waiting game and jumping into the rental market.
Most luxury rentals are found in new development rental buildings but Jonathan Miller, president, and CEO of appraisal firm Miller Samuel and author of the report, is seeing sellers put their individually owned apartments on the rental market, encouraging more leasing activity at the high-end.
“Owners think the market will come back so they are not going to sell the unit [now],” he says.
Another hallmark of the current rental market: Hefty declines in the number of new leases. With rents rising so much, landlords have been effective at retaining tenants at lease-renewal time, because tenants don’t see better deals elsewhere. New leases fell 13 percent in Manhattan and dropped 11.4 percent in Brooklyn.
While still available for some leases, concessions continue to slip, as landlords feel less pressure to offer deal sweeteners: You’re more likely to get a free month or owner-paid broker fee in Manhattan, where 40.3 percent of new leases came with a concession, compared to 36 percent in Brooklyn.
A different story in Queens
Queens renters who signed new leases last month got a small break. The median rent was up, but only slightly—by 8 percent to $2,795.
The share of new leases with concessions was 54.2 percent, up from 52.8 percent a year ago—this was the first year-over-year increase in five months.
Landlords are retaining more tenants in Queens—this was the fifth straight decline in new leases.
Other market reports
Citi Habitats released its December and fourth quarter 2019 rental market report, which found that landlords still hold the upper hand.
“The market has shifted in favor of landlords when compared to a year ago,” says Gary Malin, president of Citi Habitats. “The ongoing uncertainty in the city’s sales market continues to boost the long-term demand for rentals. When in doubt, people rent.”