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New York apartment building sales plunge

New York

SALES of New York City apartment buildings tumbled to near-decade lows last year, after new rent rules scared investors away from properties with regulated units.

By every measure, it was a terrible 2019 for those in the business of owning and selling multi-family properties.

The dollar value of purchases across all boroughs fell 40 per cent from the prior year to US$6.91 billion, the lowest total since 2011, according to a report by brokerage Ariel Property Advisors.

There were 290 multi-family deals - a 36 per cent decline, and the first year with fewer than 300 transactions in records dating to 2010.

Apartments fell out of favour for investors last year as they digested New York's new rent law, which governs about one million apartments in the city.

The overhaul took direct aim at landlords' income by making it almost impossible to raise rents, remove units from state regulation or even recoup the costs of capital improvements.

In doing so, it upended a basic tenet of apartment investing - that spending on renovations could bring higher returns.

"The fact that there is no correlation between the amount you put into a building and the amount of rent you can charge has completely shifted investment interest in rent-stabilised buildings," said Ariel president Shimon Shkury.

In Manhattan, investors steered towards non-regulated units and paid up for them. More than 60 per cent of the units that changed hands last year were market rate, according to the report. BLOOMBERG