New York Sets Dollar Volume Record, But Interest Rates Raise Concern

Three of New York City’s top five quarterly dollar volume totals ever occurred this year and the $55.4 billion year-to-date total already surpasses 2007’s record high, Cushman & Wakefield reported.

But last week’s interest rate increase could slow down at least one of the city’s sectors, said accounting firm Marks Paneth LLP, New York.

“2014 was the best investment sales market I have seen in 32 years,” said C&W Chairman of New York Investment Sales Bob Knakal. “Thus far, 2015 has been putting up a valiant challenge to that title.”

Knakal noted in some ways 2015 falls slightly short of last year’s strong performance while in other areas this year could make history. “If we look at the dollar volume of sales in the New York City market, 2015 will undoubtedly set a new record,” he said.

While city-wide transactional activity fell year-over-year, two of the city’s five boroughs, Manhattan and the Bronx, achieved a higher quarterly total this year than last, by 6 percent and 10 percent respectively. C&W noted that third-quarter sales experienced a boost from the office sector with $7.5 billion in sales, a record for that property type. The average price per property rose to $13.9 million, up 44 percent from a year ago.

“Today’s market is not quite as robust as last year’s with regard to the number of properties sold,” Knakal said, noting that this metric established a new record in 2014 with 5,534 properties sold, shattering the previous record by more than 10 percent.

“[But] notwithstanding the comparison to last year, 2015 will be a great year for the number of properties sold,” Knakal said.

Meanwhile, Marks Paneth surveyed 130 New York City real estate executives about the Federal Reserve’s decision to increase short-term interest rates. More than 40 percent said condo and co-op values will decline as a result while 34 percent said values will stay the same. Nearly one in five respondents said values will increase because of the Fed’s decision.

Half of the property executives said the interest rate hike will slow new condo and co-op development in the city while 41 percent said a rate increase will not slow construction.

But a strong majority–62 percent–of executives agreed that the rate increase will not curtail foreign investment in New York condos and co-ops.

“Given how sensitive property values are nationwide to interest rates, New York property executives’ divided view on the impact in the city of a rate hike suggests that they perceive the condo and co-op market to be pretty solid,” said Marks Paneth Partner-in-Charge of Real Estate William Jennings. “And it seems that professionals believe that foreign investors in New York apartments are hard to scare away.”