NYC Apartment Sales Crash To Near Decade Low As Government Suffocates Market With New Regulations
There's nothing like broad overreaching government regulation to absolutely suffocate any type of market.
This is a lesson that the New York City apartment market is learning first hand, as sales of apartment buildings in the city have crashed to near decade lows after new rent rules scared investors away from buying real estate as investment and/or rental properties, according to Bloomberg.
In 2019, the value of purchases across all boroughs fell an astounding 40% to $6.91 billion, the lowest total since 2011. There were 290 multifamily deals in the year, a 36% decline and the first year with less than 300 deals since 2010.
The market ground to a halt as a result of New York's new rent law, which affects about 1 million apartments in the city. The law makes it almost impossible for landlords to raise rents, remove units from state regulation or recoup costs of capital improvements.
The message this sent to the market? Stop spending on renovations.
And so, landlords did. They stopped buying properties altogether, as well.
Shimon Shkury, president of Ariel Property Advisers, said: “The fact that there’s no correlation between the amount you put into a building and the amount of rent you can charge has completely shifted investment interest in rent-stabilized buildings.”
In Manhattan, south of 96th street and West 110th, investors turned specifically toward non-regulated units and paid higher prices for them. More than 60% of units that were bought and sold last year were market rate and buyers paid an average of $758,217 per apartment, up 14% from 2018.
Investors who bought rent-regulated properties, on the other hand, demanded discounts.
In Queens, where about 67% of apartments sold were under these regulations, prices fell 7.7% to $276,261 per apartment. In the Bronx, the average sale price per unit also fell, from $185,006 in 2018 to $171,855 in 2018.
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