New York City assessors are flashing a warning sign about a slowing real-estate market—even though city property-tax bills continue to rise.
Market values of existing New York homes, apartment buildings and commercial space rose at the slowest pace in six years, under a new assessment roll released last week. The annual assessments provides a valuation as of Jan. 5 of each year.
The gains—based on changes in net income for existing commercial and apartment buildings, and sales prices for smaller homes—rose by 3.6% overall, while commercial properties were up 2.4%, just above the rate of inflation. Hotel values were up less than 1%.
The total market value of all New York properties was put at $1.378 trillion, an increase of $62 billion from January 2019.
At the same time, the new assessment data showed that property tax bills are projected to rise by 6.7% in the fiscal year beginning on July 1, assuming that tax rates are unchanged.
City officials say the rising tax bills reflect a system in which changing market values are phased in over a number of years, even at times when market values lag. In a new report, the Real Estate Board of New York, an industry group, said that real-estate taxes paid by the industry already make up 53% of all city tax revenue, including $28 billion in property taxes.
The industry group is pushing back against a campaign by some state legislators to impose an annual tax on second homes known as the pied-`a-terre tax.
The high real-estate tax burden shows “that policies that limit the amount of tax revenue generated by our industry are counterproductive to improving the lives of New Yorkers they aim to help,” said James Whelan, president of the board.
The weakening valuations follow a multiyear slump in the real-estate market, with slowing rent growth, falling commercial sales and sluggish homes sales, experts say.
Market values of apartments and commercial buildings could slow further next year, since the latest assessments are based on a full year of income and expenses back in 2018, and analysts say conditions have remained weak since then.
Robert Knakal, chairman of New York investment sales at JLL Capital Markets, said that investment sales hit a peak in 2014 and 2015, and have been slowing since October 2015, though price declines on sales that have closed have been modest. The slump has extended to land prices, hotels and condominiums, he said.
He said the market was down 10% in value, but in terms of sales volume, “This is the longest correction we have ever seen in the 36 years I have been” in the business.
Properties in Manhattan had the smallest increase in market value, 2.11%, with values of single-family townhouses up only 2%. Values in the Bronx, which has seen a new wave of investment, are up 6.3%, while Brooklyn properties were up 5.8%. Queens and Staten Island were up less than 3%.
Values of one-to-three family homes were up 9.1% in the Bronx and 6.2% in Brooklyn.
The analysis is based on changes in property values due to market conditions. But the latest roll also reflects $14 billion in increased value due to construction activity, as new buildings under way for a number of years are completed.
Jacques Jiha, commissioner of the city’s department of finance, said the construction increase was the largest such increase in 10 years. “New York City continues growing, and this year’s roll confirms that construction activity remains strong across the five boroughs,” he said in a statement.
Even including new construction, the increase in market value rose by 4.7%. On that basis, the gains over the past year were still the slowest since 2013.
Under the new assessments, the average tax on a rental apartment will rise by 7.1% to $5,441 a year, based on current tax rates, according to city projections. The average co-op taxes will rise by 6% to $8,660 and condominium taxes will grow by 5.5% to $12,113.
In Manhattan, the average tax on a condominium was due to rise to $20,045. It was listed at $14,776 for a co-operative apartment, $8,946 per rental apartment and $61,952 on a single-family townhouse.
This year, the city’s finance department listed Hudson Yards, the new residential and commercial neighborhood on the West Side of Manhattan, as one of the most valuable properties in the city, valued at $3.70 billion. The World Trade Center was valued at $3.79 billion.
The new data, released in January of each year, is a preliminary assessment statement to give property owners time to challenge it. It is for property taxes in the city’s fiscal year that begins on July 1. Owners of one-to-three-family homes have until March 16 to challenge their assessments. Other properties face a March 2 deadline.
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