After five consecutive months of rising prices, the average monthly rent stood at $5,058 in Manhattan last June. In the space of a year, real estate rentals in New York have seen prices soar by almost 30%. To understand this phenomenon, our edition went to meet Yann Rousseau, managing partner at BARNES New York.
In New York, rental prices are skyrocketing!
In June 2022, the average rent in Manhattan was $5,058 while the median rent was $4,050. Across the Brooklyn Bridge, the average rent was $3,822 while the median rent was $3,300. The average price for a three-bedroom apartment in June was $9,469 per month, up from $7,394 a year ago in New York. The average price for a one-bedroom apartment was lower at $4,278, compared to $3,475 a year ago. To understand this increase, it is still the Covid that must be pointed out.
Faced with soaring prices, two phenomena must be considered, depending on Yann Rousseau, « the first aspect is that the increase is calculated from one year to the next. In 2021, and a fortiori in 2020, there were what are called Covid concessions. As the city had emptied out a bit, it was complicated for landlords to find tenants. So, until early 2021, they gave free months of rent and lowered rents. Tenants who have been the smartest have secured long-term leases. Today, we are coming out of this period where all these Covid concessions are no longer necessary. So the increase that is believed to be drastic is due to the fact that these Covid concessions have jumped and we are back to pre-pandemic levels. In comparison to 2019, there is not a very big surge, but a rational increase, also indexed to inflation, explains Yann Rousseau. And to add ” the return of New Yorkers is the second aspect that explains this increase in rents. A lot of people had left, especially in Florida, and now we see them coming back. But above all, the offices, the universities, the whole “entertainment” part have reopened. The city has completely come back to life and people are now asked to come there to work and study, and so they have to find accommodation. »
A resurgence observed for more than a quarter. With the reopening of the borders, expatriates are also returning to New York, a phenomenon which had been suspended for more than 18 months. ” The arrival of expatriates is often aligned with the start of the school year. Since the end of 2021 and the beginning of 2022, we have seen, at BARNES, a sharp increase in the share of expatriates who were planning for the start of the school year in September 2022. But the war in Ukraine has also stopped many projects. »
This conflict, which has been going on since last February, has indeed stopped many expatriation projects, even to countries like the United States, which are geographically far from the war zone. ” We feel this conflict especially at the level of purchases because many Europeans, in a level of uncertainty that is a little too great, have preferred not to project themselves abroad. Then, a strong euro does not help to acquire real estate in dollars. In terms of rentals, we have seen less mobility than expected, due to the conflict. We had a little less requests from expats than expected explains the real estate expert.
And to add, in comparison with pre-Covid rents, prices are slightly higher, to be taken on a case-by-case basis by district. You have to take a step back and distance to understand that the 20 or 30% rent increase that we see in the press is a comparison with 2021, and therefore with the Covid period. If we take the example of a tenant who, before Covid, paid rent at $5,000, which rose to $4,000 during Covid, sees his rent go up to $5,500, he could rightly think that his rent is skyrocketing, off, he is just following a change in the cost of living. »
A very low rental inventory
New York’s outlying neighborhoods are experiencing the greatest increase, neighborhoods favored by tenants with less purchasing power. Thus, the increases are greater in Brooklyn and Queens than in Manhattan. On the Westchester, the analysis is somewhat different. A highly residential and very international district, the rental market there is more fueled by expatriations, “ we see a lot of families with several children for whom Manhattan is complicated, and since there was less mobility due to the war in Ukraine, the inventory there is very low, but that’s historic,” explains Yann Rousseau.
While prices are high, rental market inventory is very low in New York, with a vacancy rate of 1.90% recorded last June. ” We have many apartments under management, when we put a property on the market, we receive, within 24 hours, 40 requests for visits and 5 offers, without even seeing it. When we do research for our customers, we find that the inventory is relatively low, but the situation is improving compared to May and June, and I expect this to continue until the end of October. We will finally regain some normality and seasonality explains Yann Rousseau.
New York is a city that lives with the seasons and the real estate market does not normally escape it. In terms of rental, it is during the summer that the bulk of transactions are made, while the sales market observes its peak in the spring. Ideally, it is in the fall, and even more so during the winter season, that renting is easiest, as the demands are much lower. ” The month of January is really ideal to find an apartment for rent smiles Yann Rousseau.
Finally, the financial barriers to renting an apartment in New York City are well known: rents are among the highest in the country—in addition to the 15% annual rent fee payable by the tenant—and landlords have high income requirements, which can make the process particularly complicated for students and less wealthy earners. Since 2019, a law aimed at protecting tenants caps the security deposit at one month’s rent and makes it illegal to pay rent in advance, in order to reduce excessive funds to be paid upfront. But it is a thorn in the side of new expatriates. These changes mean landlords can no longer offset the added risk of taking on a tenant with a bad — or non-existent — credit history by asking for extra rent up front. Thus, if the rental pressure is strong, it is even more accentuated for expatriates who arrive in an American system where their rental contract is granted according to the credit history of a family.
If before 2019, expatriates could rent in exchange for several months of rent paid in advance, this period is now over.
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