New purchase taxes has buyers “camping out” in rentals, says Douglas Elliman
The median rent for a Manhattan apartment rose to $3,595 in July, a 5.7% gain from a year earlier, and reached a new high of $3,000 in Brooklyn, up 1.7%, as potential homebuyers waited to see what effect the state’s “mansion tax” would have on New York’s real estate.
The number of new leases in Manhattan increased 5.1% to 6,460 and gained 13% to 1,759 in Brooklyn, according to the report by Miller Samuel and Douglas Elliman Real Estate.
“The rental market in Manhattan and Brooklyn continued to strengthen again this month,” said Hal Gavzie, executive manager of leasing for Douglas Elliman. “This is partly a result of the ongoing uncertainty in the sales market, with potential buyers still camping out with rentals.”
New Yorkers are waiting to see what happens to real estate prices after new taxes kicked in on July 1. The new levies boosted the previous 1% fee on all sales of $1 million and above to 1.25% for sales priced above $2 million and 3.9% for a sale of $25 million or more. The transfer tax increased to 0.65% from 0.4% .
In most real estate markets, an increase in taxes on homes priced above $2 million wouldn’t concern most buyers, but in Manhattan the median sale price of new development – typically new condos – was $2.5 million in 2019's second quarter, according to Miller Samuel.
The report on July rents for New York also showed the median rent in Queens dropped 3.6% to $2,915. It may be a statistical blip based on the mix of units available for rent, said Jonathan Miller, president of Miller Samuel. The number of new leases rose 13.3% to 268, he said.
“The softer market in Queens was a bit of an outlier in July, and it’s too early to call that weakness a trend,” Miller said.
The vacancy rate in Manhattan shows a level of demand that landlords in the rest of the U.S. might envy. While the U.S. rental vacancy rate was 6.8% in the second quarter, matching the year-ago period, the rate in Manhattan was 2%, unchanged from the prior month.
The lowest national vacancy rate in more than 50 years of Census data was a rate of 4.8% in the first three months of 1979.