Until the last three months, 2012 was characterized by rapidly rising rents, but things slowed down in quarter four. The rental reports were released at midnight, and the Jonathan Miller, preparer of the Elliman report, found that rents rose just 0.8 percent in December, which followed 1.6 percent and 1.4 percent increases in October and November. “We’ve seen the pace of increase in median rent slow to nominal levels year over year,” says Miller, who found the median Manhattan rent to be $3,150 and the average to be $3,973. Citi Habitats put the average lower, at $3,353, noting that this was 2012’s lowest quarterly rent. Luxury and super luxury rents, however, outpaced the whole market, with the top 10 percent of rents jumping nearly 16 percent since last year. Super luxury rents rose even more, spiking 22 percent to more than $11,000/month.
“It looks like the pace of rents are slowing going into 2013 because the purchase market poached some of the froth,” explains Miller. The fourth quarter sales reports showed that 4Q of 2012 had the highest number of 4th quarter sales for the past 25 years. “Those buyers came from somewhere, and many came from the rental market as falling mortgage rates pulled tenants into the purchase market despite tight credit.”
Rents remain elevated also because of pressure from the low vacancy rate, which has fallen below year ago levels for the sixth consecutive month. Citi Habitats found the rate to be 1.38 percent, which was lower than 2011, but the highest quarterly rate for 2012.
Brooklyn also saw rents rise, with the median rent—Miller’s preferred metric since it removes the outliers—reaching $2,637. When looking at the average rent, though, prices declined 2.6 percent to $2,880. Things are going at a fast pace, spending only an average of 45 days on the market, which is faster than the average 58 days for the last five years. Because of this, landlord concessions remain a thing of the past. New rentals still double-digit gains, so plenty of renters once again opted to try their luck elsewhere rather than accept higher rents on lease renewals.
Miller says we should expect more of the same in the coming year. “Rents are expected to remain elevated, but not expected to see same growth because the key drivers of rising employment, tight credit, and low vacancy are not expected to change much in 2013,” he explains. “The ‘froth’ was pulled out because some of the excess rental demand moved over to purchase market.”