Tale of two Brooklyns: renters get deals while buyers priced out

[NEW YORK] Finding a place to live in Brooklyn is easy if you want to rent a home - not so much if you want to buy one.

An avalanche of newly built rentals has blanketed the borough, driving leasing costs down in June for the ninth time in a year and pushing landlords to compete for who can offer the sweetest deal. Brooklyn rents fell 1.6 per cent from a year earlier to a median of US$2,813, while the supply of available units jumped for the 22nd month in a row, according to a report Thursday by appraiser Miller Samuel Inc and brokerage Douglas Elliman Real Estate.

For would-be buyers, meanwhile, there are few choices - and what's there is getting more expensive. Purchasers agreed to pay more than what sellers were seeking in 23 per cent of transactions that closed in the second quarter, sending the median sale price to a record of US$795,000, the firms said in a separate report. Brooklyn's sales inventory of 2,257 homes at the end of the quarter was the lowest for the period in nine years, and it would take just 2.4 months to sell them all at the current pace of deals, also a nine-year record.

"We're hurting in terms of resale inventory," said Frank Percesepe, who oversees Brooklyn sales for Corcoran Group. The brokerage released its own report Thursday, citing a 23 per cent drop in purchase listings in the borough. "People at the lower end of the market are struggling to find something." Brooklyn's post-recession construction boom focused largely on rentals, creating a glut of high-end properties for lease, and not much to satisfy the needs of people wanting to become homeowners. Landlords who dreamed of reaping ever-higher rents in gentrifying neighbourhoods are now offering concessions to keep units filled, and tenants are taking their time to hunt for the best deal.

There were 2,620 apartments listed for rent in Brooklyn at the end of June, up 14 per cent from a year earlier, Miller Samuel and Douglas Elliman said. About 7,000 newly built apartments are expected to be added to the market this year, according to a report this week by RentCafe.com, an affiliate of real estate website PropertyShark.

"There's just a ton out there," said Hal Gavzie, Douglas Elliman's executive manager of leasing. He said consumers these days can spend as long as 90 days searching. "I'm seeing rental clients just looking at so many apartments. They're comparing all the availabilities with the incentives being offered to see what works best." In June, typically among the busiest months for renting as recent graduates settle in to start new jobs, Brooklyn landlords offered sweeteners on 17 per cent of all new leases, up from 6.2 per cent a year earlier and the second-biggest share for any month in data going back to 2010, Miller Samuel and Douglas Elliman said.

The incentives, such a month's free rent, came on top of discounts averaging 1.5 per cent off the original asking price.

The number of new leases surged 62 per cent to 1,717, a sign that tenants were opting to move rather than renew existing contracts.

Jessica B Weaver found herself looking in Brooklyn after being told her apartment on Manhattan's Upper East Side would be demolished to make way for a bigger gym. The landlord didn't offer her a deal for another unit in the building, and Ms Weaver sensed she'd have better luck elsewhere. With a rent budget of US$3,500, she began searching for a one-bedroom apartment in a doorman building that would also allow her dog.

"It was definitely in my mind that if I wanted to move, there were options, and that if I opened my search radius, there would be more," said Ms Weaver, 34, who works as a sales representative for several brands of craft chocolate.

Her online search brought her to 365 Bond, a new building on Brooklyn's Gowanus Canal. There, she was offered two free months on a 16-month lease, working out to a monthly rent of about US$3,200. The landlord didn't charge extra for her pet, and offered her use of the amenity spaces - including yoga and spin classes - for US$75 a year, instead of the usual US$75 a month, she said.

She also got a US$4,500 gift card for referring a friend to the building. Her friend got US$4,500 too, she said.

People who sought to buy a home in the same area had a different experience. The median price of a home in Park Slope and Gowanus climbed 6 per cent in the second quarter from a year earlier to a median of US$997,000, Corcoran said in its report. Buyers also had to act fast: homes in those neighbourhoods spent an average of 53 days on the market, the lowest in the borough.

In the area that includes Brooklyn Heights, Cobble Hill, Dumbo and Downtown Brooklyn, homes spent an average of 64 days on the market, down from 68 last year, according to the brokerage. The median price of completed deals there climbed 24 per cent to US$1.24 million.

"They have to be able to move quickly," Mr Percesepe said of buyers. "When they find a property - especially a resale property - that they think is perfect, they probably need to move in very aggressively."

BLOOMBERG