Manhattan's Residential Rental Market Enjoys Strong Price Gains in Q2

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According to Manhattan-based Prudential Douglas Elliman, New York City's residential rental market saw strong increases in rates in the second quarter of 2012.

The average rent was $3,778, the highest rent in two years as tight mortgage lending conditions and regional economic gains continued to drive rental prices higher. Median rent was $3,125, the second highest level over the same period. Since landlord concessions were used in only 3.7% of new rental activity with those transactions averaging only 1 month of free rent, the year-over-year gain in median rent with or without concessions was the same at 7.9%. The average year-over-year median rental increase in each quarter of the past year has been 7.6%, indicating there has been no ease in the pace of rental price gains.

The largest rent gains were seen in smaller apartments. Studio and 1-bedrooms showed the largest gains in rental price indicators driving affordability lower. As a result, the combination of rising rents and falling mortgage rates have caused the highest share of entry-level purchases since 2009. Studio median rent over the past year increased 15.4%; 1-bedrooms increased 8.5%; 2-bedrooms increased 5%; 3-bedrooms were unchanged; and 4-bedrooms increased 1.9%.

Q2's "market churn" was evidenced by rising inventory. The rise in rental prices forced many tenants to look elsewhere in search of affordability. Inventory rose, while days on market remained near 17-year lows. Inventory was up 27.9% to 5,660 apartments over the past year, as listing discount compressed further to 1.3% in the second quarter from 1.7% in the prior year quarter.

Prudential Douglas Elliman Q2 Manhattan Rental Report Highlights