New York City is factoring in an 8.2% increase in property values for next fiscal year, bolstered by demand for single-family homes, co-ops and condos.
The city set a value of about $1.4 trillion for its more than one million properties for the fiscal year beginning in July, according to a tentative assessment roll released by the Department of Finance. Residential property is projected to lead the rebound, as home buyers return from the suburbs and low mortgage rates and pent-up demand spur purchases.
Commercial properties are seen lagging, with sales depressed from pre-pandemic levels. The office market is struggling with vacant office space and uncertainty about the long-term impact of remote work, while the pandemic keeps tourists and business travellers away from the city’s hotels. Commercial properties values are still below last fiscal year, by $25.2 billion.
“The past year has seen an uneven recovery in our city’s economy, which is reflected in the FY23 tentative assessment roll,” said Department of Finance Commissioner Preston Niblack, in a news release. “Office and retail leasing activity and hotel occupancies have picked up in recent quarters, but overall office occupancy remains down, and the lack of workers and visitors means that retail stores and hotels continue to suffer.”
Real estate taxes are the biggest contributor to New York City’s coffers, providing about one-third of the revenue for its $103 billion budget, and are the primary source of funds that back its approximately $40 billion of general obligation bonds. The city projects property tax revenue will fall 7% in the current fiscal year ending June 30, and grow about 3% in the budget year starting July 1.
Citywide assessed values, which determine the value of property for tax purposes, are projected to rise 8.1% to $277.4 billion. Property values for fiscal 2023 reflect real estate activity from Jan. 6, 2021, to Jan. 5, 2022, according to the city.
Sales of co-ops, condos and single-family homes surged last year as the city’s economy started to recover from the pandemic and as Wall Street profits boomed, a boon to luxury real estate.
The number of residential sales rise 8.8% from the second to the third quarter of 2021, compared with the 10-year pre-pandemic average for the third quarter of 2.5%, according to city Department of Finance data.
Meanwhile, the pandemic’s toll on the commercial market continues as the Omicron variant stalls the return-to-office drive for New York City’s biggest employers.
New York City’s office market had about 67.6 million square feet of vacant space in the fourth quarter, more than two-thirds of which is in buildings built before 1970, according to JLL, a real estate services company.