New York Apartment Prices Q3, 2022
Posted by Wei Min Tan on October 7, 2022
New York property report: Q3’2022 Manhattan condo market
Key Point 1: Sales volume down 24.3 percent
In Q3, 2022, sales volume was down 24 percent compared to the prior year in 2021, the record year since tracking started. The decrease in transactions is mainly driven by interest rates. In efforts to combat recession, the Federal Reserve has been increasing interest rates dramatically, and this increased borrowing costs overall.
Currently, the national average 30-year mortgage rate is around 6.9 percent. Last year, it was about 3 percent. The sudden doubling of monthly mortgage payment converted a lot of would-be buyers into renters and hence decreased the buyer pool.
Key Point 2: Record high rents
Rental expense is about 30 percent of the inflation index. With inflation rate at more than 8 percent, rents commensurately increased. Further, there is added demand from buyers who became renters as result of high mortgage rates. Back in June 2022, average Manhattan rent hit $5,000 for the first time and that made the news everywhere.
In July and August, average rents continued increasing. In August 2022, average rent was at $5,246 or 28 percent higher than a year ago (table below). Compare this to the 8.2 percent inflation rate in August. The increase in rents far outpaced inflation.
Deal Example: Investor client’s condo at Devonshire House, one of Manhattan’s distinguished prewar condos designed by Emery Roth. Rented out in 2 days after receiving multiple applications. This was our prewar condo investment strategy and it worked out tremendously well.
Key Point 3: Buying opportunities
We are again in a buyer’s market (the last time was in 2020 during Covid). How fast the market has turned around. All cash buyers are at a great advantage. This is because they are not exposed to high mortgage rates, and they are not competing with buyers needing a mortgage who has since converted to being renters. The buying opportunities can be summarized as follows:
1) Cash buyers have a significant negotiating position.
2) Investors can expect increasing rents and hence rental yields. No other blue chip income asset has income growing at 28 percent a year.
3) Completed new developments, where risk is lowest, are more negotiable in both price and concessions.
Deal Example: Client purchased this unit at 88 Greenwich Street. 17th floor with double height ceiling and water views. One block from World Trade Center means strong appreciation potential. There are 4 new residential condos coming up in the area, all with much higher prices per square foot. The area is transforming and 88 Greenwich will benefit from it.
Weimin’s article, Investing in a Manhattan penthouse apartment
Deal Example: Client’s new condo in Hudson Square next to the new Google downtown headquarters (the new glass building opposite). We booked at pre-construction, rented out immediately after closing.
Weimin’s article, Buying a vacation home in Manhattan
Article updated October 7, 2022
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We focus on global investors buying Manhattan condos for portfolio diversification and long term return-on-investment.
1) Identify the right buy based on objectives
2) Manage the buy process
3) Rent out the property
4) Manage tenants
5) Market the property at the eventual sale
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