Recently on a trip to New York City and I saw this article entitled: “Mixed Report on New York Rental Scene”.
I’m interested in exploring the similarities between London and NYC. I think London has more in common with this other global metropolis than any of its domestic counterparts. (I’ll be writing about this in next.)
However this article shows some interesting findings with regard to rental volatility claiming some sensational monthly rental falls of over 20% in some areas. In reality, I think this is the danger of sample and monthly reporting, but it peaked my interest. Does NYC have higher rental volatility than London due a more elastic supply?
Going direct to the source (Elliman) we see that the core of the Big Apple, Manhattan, has delivered rental growth of 5.2% over the 12 months to September 2014. This is in contrast to it’s neighbour Brooklyn where rents have actually been falling (-3.2%) and more peripheral Queens where rents fell by even further (-6.2%) over the same time period.
Holding the cap rate or yield constant a buy-to-let investor’s returns would have fallen equivalent to the rental growth/fall. Owning a property in Queens a property investment would need to yield more than 6.2% net to receive a positive return for the year. Manhattan on the other hand has seen property prices rise by 17.4% which would m
ean total investment return for the year of circa 20% with average gross yields down at 2.9%. Traditionally investors accept lower yields in anticipation of higher growth. It appears that at the moment, they are being rewarded on both sides of the Atlantic.