Rents for Manhattan apartments rose for the second straight month in October, which will likely be considered somewhat of a surprise given all of the recent indications that the Manhattan real estate market is starting to cool off. However, these rising rents may actually be a result of the real estate market cooling off and not an indicator of a market heating up organically.
Miller Samuel Inc. and brokerage Douglas Elliman Real Estate stated in a report that the median face rent, which is rent before concessions are factored in, was up 2.8% year-over-year. September also saw rents rise 2.8% year-over-year, with these two months being the largest annual gains since December 2015.
The rise in rent reportedly comes as a result of would-be home buyers who are opting to rent instead of purchasing. They're waiting because they believe that purchase prices, which are already on the decline, will fall even further. The offshoot demand from this has allowed landlords to charge more, boosting the median face rent to $3,495.
In addition, renters are getting access to luxurious amenities like free months' rent, gym memberships and payment of brokers fees. These types of perks and amenities were offered on 41% of new leases, according to Bloomberg. Buyers on the other hand, have been faced with sellers who have been reluctant to drop their prices. At some point, something will have to give - either sellers will eventually drop prices enough to entice demand or renters will be priced out of the market.
And while this temporary rise in prices may seem like a positive for landlords, the picture isn’t necessarily that promising. Manhattan is still dealing with a significant oversupply of apartment buildings, part of the reason that the share of new leases with incentives has climbed for 41 consecutive months.
In mid-October, we wrote an article asking whether or not the NYC luxury real estate market was on the verge of collapse, pointing out that the number of unsold homes in Manhattan has plunged by 40% through September compared with the first nine months of 2017. Prior to that, in late September, we also pointed out that NYC home sellers had slashed prices on almost 800 listings during a single week during the month, the largest wave of discounts in at least 12 years.
We also recently wrote an article about why renting – sometimes for up to $10,000 a month - seemed like a safer option than purchasing.