New York sees cash buyers surge to 68%
By the end of 2023, several trends that held the residential real estate market back for much of the year— inflation, high mortgage rates and low inventory—had begun to ease.
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In December, US borrowers were given a reprieve as the 30-year fixed rate mortgage fell below 7% for the first time since August 2023.
However, the publication of robust economic indicators in the first quarter of 2024 may push the talk of rate cuts into the second half of 2024, despite the Federal Reserve signalling in January that it expected to cut rates on at least three occasions this year.
GDP in the US is projected to grow by 1.47% in 2024 according to the IMF, unemployment remains low at 3.7% and equities are climbing ever higher, with the S&P500 up 4% in the first two months of 2024 after rising 24% in 2023.
Prices displayed more resilience than sales volumes. Luxury prices dipped 2% in 2023 with prime sales declining 28% in 2023 on an annual basis, according to data from our residential partners in the US, Miller Samuel and Douglas Elliman.
Of all Manhattan buyers, 68% paid cash for their home in the fourth quarter of 2023, up from 55% a year earlier, as wealthy investors looked to the city as a safe haven, combining opportunities for diversification and wealth preservation.
As borrowing costs ease in 2024, we can expect an increase in mortgaged transactions and inventory levels to tick up as more sellers are motivated to sell.
Rents
Although still a landlord’s rather than a tenant’s market, the rate of rental growth in Manhattan is easing. Knight Frank’s latest Prime Global Rental Index revealed a 0.3% fall in luxury Manhattan rents in 2023, although they still sit 45% above their pandemic low in January 2021.
Affordability is a key factor with wages failing to keep pace with rents. Plus, with limited choice tenants are signing up to longer leases, reducing the frequency of rent reviews and opportunities for hikes.
Stock levels are now improving, in part due to the implementation of a ban on short-term lets that came into effect in September 2023, leading some landlords to relist their holiday let as a long-term tenancy.
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