Finance So... What is NYC Real Estate Worth? And Where are we Headed?


February 19, 2016

  • The New York City Department of Finance has priced the “Full Market Value” of NYC to be $1,071,973,871,651 (Trillion)!  

  • Tax Revenues to grow to over $211 Billion due to new inventory by FY2017.  

  • Brooklyn sees the greatest growth; however, Manhattan dominates in terms of total dollar value invested.  

  • Commercial property development lags vs. Residential development, creating strong price inflation, due to stronger demand in commercial real estate prices.  

 

  New York City is quite different from most real estate markets. Every block and lot has been digitized and assessed. The City’s real estate market is one of the most efficient and well-structured in the world; and, competes with cities such as London, in terms of total dollar value invested. This has made Manhattan an elite investment market promoting: growth and investments to move faster, and into the outer boroughs. As Manhattan becomes quite an expensive place to live and work; how much is NYC real estate worth?  

 

  The New York City Department of Finance has priced the “Full Market Value” of NYC to be $1,071,973,871,651 (Trillion)! Where 10.58% of this growth happened only since 2014; furthermore, this pushed property tax revenues up by 8.10% to $211,003,774,960. (We should note that the assessed value of NYC real estate to be $237,605,192,362. Per Investopedia.com: “In some locations, property is given an assessed value that is 20% of the property's fair market value”. Finally, assessed value is purely a government taxation figure and fair market value is a price set by well-informed buyers & sellers.). This tax trend will only accelerate by FY2017 as the growing number of new residential & commercial units will only foster further growth for the Municipality.  

   

 

  With the greatest growth coming from the rise and popularity of Brooklyn, followed by Queens and Manhattan; Manhattan still dominates in terms of new construction: size and dollar volume. The growth of development in 2015 almost doubled from 2014, and 64% of this growth coming from Residential projects, across NYC. Brooklyn saw the greatest percentage growth in Residential units, as 87% of all construction in 2015 was residential. However, Manhattan dollar value of new development almost double from 2014 to 2015 with 49% of the development being in Residential vs. 51% in new Commercial assets.  

 

  For the City of New York this bring a tremendous amount of fresh tax revenue. Condominiums (categorized as Tax Class 2) escalated at compound annual growth rate of 6.99% per year in 2015 and is expected to rise to a compounded annual growth rate of 10.81% per year by FY2017, due to the new residential inventory being developed in NYC. As Commercial Real Estate only accounted for 36% of new development projects in 2015, NYC has seen a more modest rise in this asset class—75% of commercial office space’s in NYC is found in Manhattan.  

 

  As Real Estate prices continue to increase, and land becoming more scarce, the trend of the vertical super structures have become more common place--reserved mostly for the wealthy elite and high net worth foreign investors. This trend demonstrates a positive factor, as more tax revenue pours into NYC; however, it also creates significant price inflation for the general residential population. For the investor NYC continues to be a prime destination, only competing with London for its top spot, per a recent publication by the Economist.  

 

  Price growth in places like Brooklyn & Queens points more to the rise of higher quality inventory coming to market, greater demand for lower priced and bargain real estate. However, the rapid price inflation shows that the market is reflecting and adjusting to this trend quickly. With continued low cost of debt and the possibility of negative interest rates, we should see real estate prices hold. Per the statistics provided by the NYC Finance department, we should expect real estate prices to retain their values or continue to grow in NYC.    

 


 
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