Despite apprehensions that rising interest rate rises, the collapse of Silicon Valley Bank and fears of a recession will temper buyer sentiment, the unsettled financial and economic environment may actually favour prime property in tier one cities such as New York, and luxury property prices are forecast to increase by 2 percent in 2023, Knight Frank’s New York Market Insight report said.
Sales rates remain robust. Over 14,500 properties changed hands in Manhattan in 2022, 23 percent above 2019’s pre-pandemic levels, and the city as a whole posted 244 sales above $10 million, more than any other global city in 2022, showed the KF Q2 2023 analysis which is an assessment of current conditions in New York’s luxury residential market including a round-up of the latest data and trends. The report added that with cash buyers accounting for 80 percent of new home purchases in Manhattan, the market is better insulated from rate hikes.
Manhattan’s luxury market is on a firm footing. While the S&P 500 fell 19 percent in 2022, and estimates suggest crypto plummeted 50 percent, luxury homes in New York registered 2.7 percent average growth, despite the Federal Reserve embarking on its fastest pace of rate hikes since the 1980s, the report noted.
Although the 30-year mortgage rate has fallen from a peak of 7.32 percent in November 2022 to 7.08 percent in March 2023, it remains high compared to historic levels. Leveraged homeowners are opting to stay put rather than incur a significant jump in mortgage costs, leading to reduced inventory levels.
The rental market bounced back strongly following the pandemic. Luxury rents are up 49 percent since their pandemic low in Q1 2021, and increased 19 percent in 2022 alone. A lack of stock persists, leaving tenants opting for longer leases, the analysis said.
The number of properties available for rent in Manhattan has shrunk from a high of 41,516 in October 2020 to 14,148 in January 2023. Tenants are also looking to lock in for longer while mortgage costs remain elevated and rental stock constrained. Two-year leases as a proportion of all Manhattan leases have jumped from around 16 percent in February 2021 to 42 percent in January 2023, according to data from Miller Samuel.
At $10,995, Central Park South has the most expensive median rents. The fashionable neighbourhoods of Tribeca and Soho sit in second and third place with median asking rents of $9,500 and $6,395 per month respectively, it added.
