New York apartment rents need to drop 15pc says Trump property pal
Apartment rents in cities such as New York and San Francisco will need to fall by as much as 15pc for a glut of high-end developments to be absorbed, according to billionaire real estate investor Richard LeFrak.
"We built a lot of new product at the high end, anticipating incomes that don't exist in the market now," LeFrak, chairman and chief executive officer of the LeFrak Organisation, said last Wednesday in a Bloomberg Television interview.
"We need more affordable product in the market. There's a huge demand at that price point," he added.
New York landlords are already feeling the pinch as renters take advantage of a flood of new buildings to negotiate concessions and price cuts. Rents fell last month for Manhattan apartments of all sizes, the first across-the-board decline in at least four years, as property owners compromised to keep units from going empty.
Landlords whittled an average of 3.3pc off their asking rents in February, compared with 2.5pc a year earlier, according to appraiser Miller Samuel Inc and brokerage Douglas Elliman Real Estate. On top of that, concessions such as a free month or payment of broker's fees were offered on 26pc of all new leases, the second-highest share in the firms' records.
LeFrak, whose business is best known for building the eponymous apartment complex in New York's Queens borough, has been tapped by US president Donald Trump to help spearhead a committee on infrastructure spending. Details of the Trump administration's plan to rebuild America's roads, bridges and other public works have been scant. A proposal that would include about $1 trillion in spending from multiple public and private sources over the course of several years could be unveiled later this year, LeFrak said in the interview.
While the high-end landlords of New York, San Francisco and other major US cities are being forced to slash rents to secure tenants, the arrival of Donald Trump in the White House has proved to be a boon to the prospects of America's homebuilders.
Confidence within the sector is the strongest since the mid-2000s housing boom as sales prospects improve despite rising mortgage rates, according to data released last Wednesday by the National Association of Home Builders/Wells Fargo.
According to the latest NAHB Index, the US builders' sentiment gauge rose from an unrevised 65 in February to 71 in March, the highest level since June 2005. Any reading greater than 50 indicates more respondents have reported good market conditions
The Index's measure of the six-month sales outlook increased to 78 from 73, matching the highest since 2005, while the index of current sales climbed seven points to 78, the highest since December 2004.
In what would appear to be a response to President Trump's vow to renew regions beyond the major cities of the US east and west coasts, confidence in the midwest rose 9 points to 73, a record in data going back to 2004. (Bloomberg)