From our partners at Platinum Properties
It’s officially a new year, and here at Platinum Properties, we’ve been reflecting on the past twelve months and looking ahead to what the next twelve will bring. We sat down with Daniel Hedaya, President of Platinum Properties, for his forecast on the residential real estate market in 2017.
Before we look ahead to 2017, let’s talk about what the residential real estate market looked like in the last year. What were some of the takeaways in 2016?
Throughout 2016, there was a softening, or dip, of the sales and rental markets. However, it’s important to look at different sectors of the market to spot the real patterns, rather than just looking at the whole. Sales on the low end of the market, which we typically consider to be properties valued between $1-3M, were healthy. It was the middle and high ends of market, or sales of $3-8M and $8-15M, which slowed dramatically.
Will this trend continue in 2017?
Anticipate that prices will continue to dip a bit on the middle and high end. For the lower end, one good sign is that the economy is in a place where unemployment is relatively low. Also, federal interest rates will be rising after the first two quarters, so people will be trying to lock in rates before then. These two things should help to drive in sales. Late in the year we should see a normalization in sales.
How about for the rental market? Will prices rise or fall?
While gross rents haven’t changed dramatically over the last year and probably will not change much in 2017, we can expect more and more property owners will offer concessions to entice renters. In the 3rd and 4th quarter of 2016, we saw around one in four properties had concessions offered.
What could this be attributed to?
One thing I would attribute that to is a backlog of inventory hitting the market, partly due to foreign investment deals made in 2013. These units, which were pre-sold a few years ago, are just now becoming available to renters. We even saw a softening of the market and an increase in inventory this past summer, when vacancy is usually low. Landlords would rather offer concessions to move these units than lower the gross rent.
Aside from the increase in concessions offered, what are some other trends in residential real estate you see for 2017?
What we are seeing is developers making units with a higher price per square foot but lower square footage total. The majority of units being built and sold are in the $1-3 million dollar range. The units are smaller with more efficient layouts, which seems to be a trend that will continue in 2017.
Your firm does a lot of work in the Financial District. How has this neighborhood fared over the last year compared with the rest of Manhattan?
There is a lot of activity going on in the Financial District, like the completion of Brookfield Place, the new Whole Foods, and of course the World Trade Center mall, but there was still a lot of rental inventory in 2016 and that is projected to continue in 2017. Units aren’t selling with the velocity that they used to, but one of the things that makes the units there attractive is that they tend to be studios and 1-bedrooms, which are in high demand. Seventy percent of rentals in 2016 leased were studios or one bedroom.
With the opening of the 2nd Avenue subway this week, do you have any predictions for the Upper East Side’s residential real estate market?
The 2nd avenue subway line will certainly have an impact now that the neighborhood is more accessible and the businesses which were affected from the construction will be able to return. It will definitely be a more attractive neighborhood. I do think that the property managers or owners will still be offering concessions, but maybe not as many as in other neighborhoods.
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