For better or worse, the city that never sleeps has become even more of a draw for jobs and talent than ever before—if that were even possible. Netflix and Spotify are opening new offices in Manhattan, while Google and Amazon expand their footprints and people watch with rapt attention while Amazon narrows its search for a home for its second headquarters. Will it be New York? No matter how you slice it, growing supply of high-paying jobs has brought with it residents with higher incomes who have the potential to outbid NYC’s existing residents. For those with their finger on the pulse of the market, there are several noteworthy new plot twists helping shape the NYC real estate forecast for 2018.
Lack of affordable homes
The latest New York housing stats published by NYSAR show the usual US housing data: supply of affordable homes has dropped 1%, sales are down 2.5%, and average prices are up 7% from last year. New listings are down from the previous quarter, average prices are up, and the number of months’ supply has decreased 29%. Not surprisingly, there’s no lack of conjecture about a possible US housing crash that would take NYC down with it. Recent reports of high foreclosure rates in Queens, the Bronx, and Staten Island are unsettling to many.
While evidence of a crash is debatable, one thing is for sure: New Yorkers will face growing competition for affordable homes. Buyers holding out for homes priced below $1,000,000 may regret waiting, and many will turn to outer boroughs for housing that falls within their budgets. Income averages about $60,000 a year in NYC, making it challenging for many to buy homes averaging $680,000. It’s estimated that to purchase a home in NYC, you need an income of $100,000.
NYC real estate forecast for 2018: highlight on declining luxury homes
Of all the NYC housing markets, the high-end Manhattan market is falling the fastest. There is now a 17-month supply of luxury apartments in Manhattan, up from 10 months just a year ago, and total sales volume fell 12% compared with the fourth quarter of last year—its lowest level in six years. Manhattan rents dropped by 1.9% in November and luxury home sales across the city will hit new lows as far as the 2018 real estate forecast for NYC is concerned. The average sales price in Manhattan fell below $2 million for the first time in nearly two years. All of this translates to lower prices for the ultra-rich, but experts continue to keep an eye on any trickle-down effect on the “normal-rich.”
Inventory expansion is at least partially responsible, but many brokers say the declines are the result of uncertainty around the Republican tax plan and say many have since rushed in and will reflect a rebound. But analysts say that in spite of this, the tax law—which limits the deductibility of state and local taxes—will continue to add pressure to NYC housing prices, particularly in the luxury market.
More than 11,000 units are under construction in Manhattan, and another 24,000 are in the planning and permit stages. The number of new developments is expected to continue to rise this year and next, which will only increase inventory. While demand for “low-end” apartments priced at $1 million to $2 million remains strong, sales of apartments of more than $5 million will only get more difficult.
Public transit changes driving new demand
The NYC real estate forecast for 2018 remains defined by the city’s transportation backbone: the subway. In addition, the NYC Ferry service expanded last year and is set to up its capacity in 2018 and extend its reach up Manhattan’s eastern shore and into the Bronx. Meanwhile, the L train shutdown scheduled for 2019 will definitely have its effect on people’s real estate choices in the year to come.
Prospective renters have an edge, says NYC real estate forecast for 2018
While the average rent in Manhattan dropped by 0.63% to $3,919, Brooklyn and Queens registered similar declines, with rents decreasing by 0.8% and 0.7% respectively. With the development of new high-end rentals across the city, a 7-year surge in rents may have peaked in 2017. Consequently, landlords have started offering more concessions to attract tenants. The NYC real estate forecast for 2018 sees prospective tenants possessing a new negotiating edge due at least in part to growing promises of new buildings. Anyone looking for an apartment in 2018 should be asking prospective landlords for a month or two free.