Posted by Wei Min Tan on May 18, 2022
The key takeaways from the May 2022 Manhattan Real Estate Market Update are recession concerns, strong buyer demand and rising rents/high cap rates.
Manhattan Real Estate Market Update May 2022
The first point relates to concerns about the recession. The labor market is very hot, while consumer spending is high. Oil prices are also high due to the war in Ukraine. Additionally, supply chain issues mean that goods take longer to arrive and this is another reason driving prices up.
In March, the inflation rate was 8.5%, the highest in 40 years. To fight against high inflation and control the economy, the Federal Reserve raises interest rates. There are fears that higher interest rates will shrink the economy and trigger a recession.
Conversely, some say that a recession would not be likely because for a recession to occur there must be job losses. With the current evolution of the labor market, it is less likely that there will be job losses because companies are hiring aggressively and there are not enough employees to fill the available jobs.
Read Weimin’s article: How Recessions Affect Manhattan Property
Strong buyer demand
In the sell market, the supply is low and it is always a seller’s market. Buyers trying to lock in still historically low interest rates are struggling to find available property.
Rising rents/high cap rates
The rental market is the hottest it has ever been. Rents are still higher than pre-pandemic levels. This translates into high capitalization rates, rental returns for owners. It’s a good time to own right now, especially if the owner bought the property several years ago when prices were lower. For the apartments of our customers, we have increased the rents by 20 to 50%.
Read Weimin’s article: Is it a good time to invest in residential real estate in Manhattan, New York?
Manhattan property (condo) performance during the three previous recessions
September 11, 2001 — The price per square foot has not gone down at all. The market was flat for about four weeks, but after that it was very robust. Then prices rose until 2008 when the subprime mortgage crisis hit and Lehman collapsed.
Lehman collapse — The impact of the subprime mortgage crisis on Manhattan has been delayed for a year. It hit the rest of the United States in 2008, but didn’t hit Manhattan until 2009 and lasted until 2010. The price per square foot in Manhattan fell about 15% while the rest of the United States fell by about 35%. After Lehman, prices continued to rise until the previous peak in 2017, when it was around $2,200 per square foot. The market slowed from 2017 to 2019. Trading activity at the start of 2020 was very strong and we thought it was going to recover but then covid hit.
Covid-19 recession – The market closed for three months, from March to June 2020. The first quarter of 2021 was the lowest in terms of price per square foot as it reflected transactions from the end of 2020. From the beginning of 2021 to the end from 2021, and extending through 2022, prices have increased. Prices in the first quarter of 2022 continued to rise, but they are still below the level of 2017.
Looking at the historical trend, prices go up for several years, go down for about 2 years during a recession. Then prices go up for several years. This is why we expect prices to rise over the next 6-7 years.
Manhattan Rental Report
According to Miller Samuel’s latest rental report, rents have gone up and inventory has gone down. Average rental price and rental price per square foot increased 32% and 25% from a year ago. The number of new leases was higher than last month, but lower than a year ago. Listing inventory was 4,709, 77% lower than a year ago. Peak inventory occurred at the end of 2020, when it was around 15,000 units. The vacancy rate in April 2022 was 1.55%. A year ago, it was more than 11%.
This shows what a strong rental market we currently find ourselves in.
Read Weimin’s article: 2022 Cost of Manhattan, New York Apartments
What we do
We focus on of global investors buy condos in Manhattan for portfolio diversification and long-term return on investment.
1) Identify the right purchase according to the objectives
2) Manage the buying process
3) Rent the property
4) Manage tenants
5) Market the property during the eventual sale
Wei Min’s media interviews by CNBC, CNN, New York Times about investing in Manhattan real estate