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With the Empire State Building in the background, apartment buildings stand in the Chelsea neighborhood in Manhattan, January 11, 2018 in New York City.
- Investors are buying New York City condos to rent out instead of live in at a record pace, according to Bloomberg, citing StreetEasy data.
- The three buildings that generated the most investor interest were in Brooklyn and Queens, showing that investors don't only have their eyes on Manhattan.
- Builders of higher-end homes are under pressure to lower prices and speed up sales, which should give more negotiating power to buyers with bigger budgets.
People are buying up New York City condos and turning them into rentals like never before.
Last year, 1,313 condos were purchased as investments instead of residences, according to data compiled by listings website StreetEasy and cited by Bloomberg. That's the highest since StreetEasy started keeping track in 2010.
The buyers are betting that property values in America's most-populated city will continue to appreciate, even though the pace of rent growth is slowing down.
A separate StreetEasy analysis published late last year found that studio apartments generated more income per dollar invested than one, two, or three-bedroom apartments. In general, more expensive properties returned less; apartments that cost under $750,000 yielded a median 3.3% return, while those that cost over $3 million yielded 2.6%.
As Bloomberg's Oshrat Carmiel reported, investors don't only have their eyes on Manhattan, the city's most populous borough. The three buildings that generated the most investor interest were in Brooklyn and Queens.
These buyers could be coming in at an advantageous time when lots of new buildings are shooting up across the city. StreetEasy found that in May, the inventory of homes in the city reached an all-time high. Although it's typical for many homes to get listed before the busy home-shopping season, the spike this year was more than usual.
In addition, buyers are in a good position to score a discount, because that's one way builders can get their properties off the market faster. Even though more condos were available in May, sales dipped for a third straight month, according to StreetEasy.
"More affordable homes are the hardest to find, and are sure to sell quickly," Grant Long, StreetEasy's senior economist, said in a report. "But higher-end homes, particularly those joining the market from the ongoing stream of new development, will be pressured to lower prices or linger on the market. This summer is poised to offer an excellent negotiating opportunity for buyers with big budgets."