Rents for Manhattan apartments rose for the second straight month in October, ending a period of many consecutive months of declines, and a surprise in light of recent indications that the Manhattan real estate market is sharply cooling. However, higher rents may actually be a result of the real estate market continuing to cool and not an indicator of an overall, organic market rebound.
Miller Samuel and brokerage Douglas Elliman Real Estate stated in a report that the median face rent, the one which is paid 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 choosing to rent instead of purchasing. They're waiting because they believe purchase prices, which are already on the decline, have yet to bottom. The resulting rising rental demand 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 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 resulting in a sharp decline in transactions. 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.
Meanwhile, the picture for Manhattan's real estate market remains gloomy. 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 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. More recently we discussed why renting – sometimes for up to $10,000 a month - seemed like a safer option than purchasing.