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Blame 'Brooklyn Spillover' For Rising Prices in Queens

The latest round of market reports are out, showing that 2015 wrapped with high but cooling rental prices, but rising prices in both Brooklyn and Queens. The Elliman rental reports share some good news: after a year of rising rents in Manhattan, Brooklyn and Queens, price hikes slowed down—at least a little. Manhattan's median of $3,350 is down 0.3 percent from the previous month, but up 3.1 percent from one year ago, while Brooklyn's December median of $2,899 is unchanged from last year. Queens rents showed the biggest drop, with a median of $2,551, which was 10 percent lower than last year. Queens sales, however, set record after record, while Brooklyn prices hit the second highest numbers in history—the highest numbers were set in the prior quarter.

Although there was a slight drop in the month-over-month median, Manhattan's year-over-year increase marks the 22nd consecutive month that median prices have risen in the borough. (Although numbers whiz Jonathan Miller points out that that the rate of year-over-year growth in the median rent has been cooling down since August.) The average rent was up 4.8 percent a year ago to $4,149, the highest number it's hit in six years. Despite the rental cooling-off, numbers are rising higher for non-doorman buildings than they are for doorman buildings.

Some good news: landlords are paying more concessions—free rent and brokerage fees—than last year, up from the 1.1 month average to 1.5 months. The vacancy rate's slightly up from a year ago, from 2.52 percent to 2.74 percent, although listing discounts are down from from 3.9 percent last year to 3.3 percent.

The market report by MNS also showed that rental prices in Manhattan decreased from last month, dropping .85 percent in December thanks to "seasonal changes." The annual average rent, however, increased 1.95 percent, from $3,836 in December of last year to $3,911 this December. The numbers showed that over the year, the overall average Manhattan rent has increased by 1.95 percent, with Battery Park City leading the pack in a rental increase of 6.8 percent.

[Image via Citi Habitats]

The Citi Habitats report points out that the month-to-month drop in the Manhattan rental market is most prevalent in smaller apartments—pricing for studio apartments declined the most, with a 3.4 percent drop. Rents for one-bedrooms declined 2 percent on average, while average pricing for two- and three- bedroom homes fell by 1.3 percent and 1.0 percent. However, Citi Habitat notes that prices are across-the-board up from last year, with average rents for studio apartments up 6.7 percent and rents for one-bedrooms up 6.1 percent.

[Image via Douglas Elliman]

Brooklyn's rental numbers show less growth—the median price is unchanged from last year, making this the second month without an increase. The slowdown, according to Miller, has been happening since this summer and is hitting larger apartments the hardest. Greater rent growth is evident in smaller apartments: the median price for studios rose 9.9 percent from last year to $2,538; one-bedroom apartments rose 8.6 percent to $2,856. And while Brooklyn's not cheap, the numbers show that it is still $451 cheaper to rent there than in Manhattan. And like Manhattan, landlords are showing more concessions for renters, with a jump from 1.1 months of concessions last year to 1.5 months now.

[Image via Douglas Elliman]

Now onto the price drops in Queens, which Miller called "volatile." The $2,551 median is down 6.7 percent from last month, and 10.1 percent from last year. Total inventory is up a whopping 75 percent—that's compared to an inventory increase of 2.7 percent in Brooklyn—and units are spending more time on the market. The falling prices were mostly influenced by rentals in new developments, according to Miller. And like in Brooklyn, prices on larger apartments showed bigger drops than prices of smaller units.

[Image via Douglas Elliman]

Queens sales, on the other hand, are seeing a huge increase. Median sales price is up 9.2 percent from last year to $470,000, a price that's been rising for the past 18 months. There were 24.5 percent more closed sales and 6.5 percent less inventory. Listings were also on the market for less than 40 days, which is the fastest marketing time Miller has tracked in Queens in 11 years. "Queens price increases were across all property types," says Miller. In fact, average condo price per square foot ($677), all co-op price indicators and the 1-3 family median sales price ($590,000) all set records. Three of the six regions in Queens—central, west and northeast—set new median sales price records as well. Miller describes the records and surging market conditions as "Brooklyn Spillover."

[Image via Douglas Elliman]

In Brooklyn, the average sales price ($808,121) and median sales price ($650,000) were the second highest on record, just short of the prior quarter records. Of course, these strong prices aren't anything new. In fact, the average sales price has now increased this quarter on a year-over-year basis for 4 full years, and it's the 13th consecutive year-over-year quarterly increase in median sales price. Brooklyn sales broke records in both the condo and one- to three-family home market. The average price per square foot for condos broke the "$1,000 threshold" for first time, coming in at $1,059. 1-3 family sales, which led the pack in number of sales, also set a price per square foot record, rising from $396 last year to $416.

So what do the numbers say about the year ahead? While Miller thinks it's "certainly possible to see more price growth in the future," especially with Brooklyn sales, he believes that it's hard to see the price hikes continue indefinitely for both rentals and sales.

· Elliman report December 2015 [Douglas Elliman]
· MNS Manhattan Rental Report [MNS]
· Citi Habitats Market Report [Citi Habitats]