Jul 26, 2017
According to this week’s market report from Property Shark, the second quarter of 2017 brought a period of renewed price growth to many areas of New York City, particularly to its most expensive neighborhoods. Median sale prices trended upwards in most of the city’s 50 most expensive neighborhoods. Only 11 areas saw prices decline in Q2, a significant change from Q1, when 20 neighborhoods saw median sale prices trend downwards.
Maintaining its #1 position from a year ago, TriBeCa’s median sale price continued to grow, expanding 24% compared to Q2 2016. As sales activity also increased year-over-year, the landmark New York neighborhood finished the second quarter with a $5,175,000 median sale price.
The Financial District reshuffled the city’s top 10 most expensive neighborhoods, becoming New York City’s #6 most pricey neighborhood. Following a whopping 88% year-over-year increase, the Financial District’s median sale price surged to $1,900,000. Luxury developments such as 50 West Street contributed significantly to the District’s extraordinary rise – high-priced units here have inspired a veritable feeding frenzy in the city’s tight real estate market.
The city’s most remarkable price increase came from Brooklyn, in Fort Greene as median sale prices ballooned by a jaw-dropping 151%. Barely making the city’s to at #97 in 2016, the historic South Brooklyn neighborhood saw median sale prices jump from just $451,612, to $1,135,000 over the past 12 months, landing at #18.
Brooklyn maintained 2 neighborhoods, Boerum Hill and DUMBO, among the city’s top 10 most expensive, even if median sale prices have started trending towards more established levels. Sales activity cooled off at several luxury developments which artificially inflated median prices in Q1, but other areas continued to experience fast-paced and high-priced sales.
Boerum Hill was barely the city’s 46th priciest neighborhood in early 2016. Now, with a median sale price of $1,975,000, Boerum Hill ranks as the 5th most expensive neighborhood in New York City and the most expensive in BK, as high-end condominiums such as The Boerum continue to see rapid sales in their luxury inventory. Overall, the priciest neighborhood in Brooklyn experienced a 51% growth in the median sale price in the past 12 months.
In listing platform news, within 24 hours of introducing a new $3-per-day fee for rental listings, the number of rentals posted on StreetEasy’s platform plummeted 55 percent from almost 31,000 on Monday to close ot 14k on Tuesday, according The Real Deal.
In Brooklyn, the number of listings fell from around 10,700 on Monday to 4,000 on Tuesday, which is a 62% decline. Queens experienced a 69 percent drop. Although the fall in listings was expected, this could potentially be a defining moment for a site that has come to dominate the market.
In finance news, More and more investor are putting their money into real estate instead of hedge funds because of geopolitical risk and high fees. At the end of the second quarter, wealthy investors had 33 percent of their portfolios in real estate. Bloomberg reported that the average allocation in hedge funds by those who took the survey fell to a record low of 4 percent. Last year and for much of this year, hedge funds have trailed the S&P 500. Though the industry has seen eight consecutive months of growth, the increases in gains have been small. In September, the Wall Street Journal reported that the hedge fund slowdown was contributing to a drop in rental growth and landlord concessions at office properties.
In overseas investment news, Private equity leader Ralph Rosenberg thinks prices for London’s core commercial and residential properties could fall by 5 to 10 percent following the Brexit vote. The real estate head at investment firm KKR also told Bloomberg that there could be opportunities found in Manhattan’s luxury condo and hotel markets, which he said are suffering from imbalance. The hotel market in particular has suffered from excess supply and reduced international demand because of a strong U.S. dollar.
Rosenberg also said he thinks the U.S. commercial real estate market as a whole is in “equilibrium” and that demand from Chinese investors continues to be strong even though a recent increase in regulatory pressure could kill the “outlier bid” for trophy buildings, reported by the Real Deal.
In inventory news, New York City’s metro region is expected to see a massive 27,000 new rental units hitting the market by the end of this year, up from the 16,000 units that opened in 2016, according to a report from search engine RentCafe. This is likely a key reason why agents are experiencing a slowdown in the rental market. As reported by DNAinfo, Long Island City leads the pack with more than 3,700 units projected this year. Downtown Brooklyn came in second with more than 2,300 units expected to open, followed by Jersey City. Several neighborhoods near Downtown Brooklyn were also in the top 10, including Fort Greene, Boerum Hill/Gowanus and Prospect Heights. Overall, Manhattan was projected to have more than 7,000 units across Hell's Kitchen, Chelsea, Murray Hill and the Financial District.
In Hudson Yards news, the towers that make up Hudson Yards on Manhattan’s far west side are rising fast. But two key pieces of infrastructure — the tubes that would link a new tunnel under the Hudson River to Pennsylvania Station — have run out of funding. Work on the project came to a halt after the federal Department of Transportation pulled out of the development in the latest sign that the Trump administration is losing interest in a $23.9 billion infrastructure project considered vital to New York City and New Jersey.
Currently, the first and second sections of the casing are complete, while the third is fully designed but lacks construction funding. According to the Times, it could be a long wait for funding to materialize, since a recent report estimated that the new Hudson River tunnels will cost nearly $13 billion, more than $5 billion over the original estimate. If Congress funds the project in the near future, construction could begin by fall 2019 and wrap up in spring 2026.
Despite its political reputation taking a hit worldwide, The United States is still a world leader in attracting foreign money to its real estate market, while countries like Canada, the United Kingdom, Australia, and New Zealand are starting to see foreign buying tapering.
The United States has been seeing a surge in foreign buying according to the National Association of Realtors (NAR). These numbers are showing explosive growth in both the transactions, and dollar volume. Over the past year, there has been a 32.4% growth from the previous 12-month period. The US has foreign buyers from all over the world, but just five countries are estimated to make up the majority of sales by dollar volume. Chinese buyers lead the way, while Canadians came in 2nd, with a massive 113% increase YOY. Residents of the United Kingdom came in 3rd, a 72% increase YOY. Mexico came in 4th, while India was in 5th. This is huge growth, and will likely contribute to upwards pressure on home prices.
In terms of the number of homes, the same five countries are estimated to top the list. Chinese buyers bought 40,572 homes, a 38% increase YOY. Canadians bought 33,819 homes, a 25% increase YOY. Mexicans bought 28,516 homes, a 59% increase YOY. Indians bought 14,934 homes, a 2.86% increase YOY. Residents of the UK bought 12,869 homes, a 40% increase YOY. That’s 46% of the 284,455 foreign purchases made across the US, according to the Real Deal.
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