Manhattan Condos Are Barely Yielding More Than Government Treasuries

Manhattan condo buyers who rent out their apartments are getting little more yield than they would with government debt.

Newly purchased condos that were listed for lease in the second quarter brought their owners a median return of 2.5 percent, according to an analysis released Monday by property-listings website StreetEasy. It’s been stuck at that level since the end of last year, the lowest in data going back to 2010. The median yield on relatively risk-free 10-year Treasury notes was 2.25 percent in the second quarter.

“This is the lowest point we’ve seen in history,” Grant Long, a senior economist at StreetEasy, said in an interview. “It’s a steady downward trend.”

A construction boom and the perceived strength of New York real estate has been luring investors looking for a safe place to park their cash and generate income. Between January 2010 and June of this year, more than 8,000 condo units were sold and then listed for rent within 180 days of the closing, StreetEasy said.

The investment thesis had promise in 2011, when rental yields peaked at 3.9 percent in the third quarter. But as developers added ever-pricier units to the skyline and the supply of rentals swelled, income prospects for those who buy and lease out condos have been diminishing fast.

Buying a condo “certainly appears to be a less-attractive investment than it was in the wake of the financial crisis,” Long said. “Sales prices have gone up enormously since then, and they’ve gone up more than rents have.”

In 2011, the median purchase price of condo units that became rentals during the third quarter was $899,000, StreetEasy said. In the second quarter of this year, investors who bought condos to lease out paid almost double that amount — a median of…

Read the full article from the source…

Leave a Reply

Your email address will not be published. Required fields are marked *