Survey is First to Take Industry’s Temperature in Wake of Legislative Changes in Albany
The Real Estate Board of New York’s (REBNY) Real Estate Broker Confidence Index for the second quarter of 2019 was 6.64 out of 10—a decrease of 0.28 since brokers were last surveyed about the first quarter of 2019.
Residential and commercial broker confidence both experienced decline in the second quarter of 2019 compared to the first quarter of the year in the wake of the new regulations enacted by the New York State Legislature in Albany this spring.
The Commercial Broker Confidence Index, which focuses only on responses from members of REBNY’s Commercial Brokerage Division, was 7.06, a decrease of 0.18 since brokers were last surveyed about the first quarter of 2019. Year-over-year, the index increased by 0.63, up from 6.43 in 2018.
Much of the decline in confidence from quarter-to-quarter can be attributed to uncertainty regarding new regulations to both the commercial and residential sectors.
“New rent regulations will negatively affect multifamily / apartment building sales, which will lead to a lesser amount of new retail shoppers,” said one commercial broker.
The overall American political climate, not just limited to New York City, is also playing a role. Another commercial broker said that “instability of White House in foreign affairs, incoherent trade policy, and political pressure on the Fed provide mixed signals to markets and the economy.”
However, despite the slight drop, the strong local economy buoys broker confidence and is responsible for the year-over-year increase.
The Commercial Broker Future Confidence Index, measuring brokers’ expectations of the commercial market six months from now, declined to 6.44 from 6.69 a quarter ago. This indicates a slight sense of doubt in the near future of the market, though overall commercial broker confidence remained stable quarter-over-quarter.
The Residential Broker Confidence Index, which focuses only on responses from members of REBNY’s Residential Brokerage Division, was 6.21. That is a 0.38 decrease since brokers were last surveyed, though confidence improved 1.58 year-over-year.
Most of the decline can be attributed to the new rent regulations passed in Albany, which throw uncertainty into New York’s residential market.
“The changes to rent regulations will negatively affect NYC rental development and instead encourage for sale development,” one broker said. Another added that “the ripple effect from the new rent laws is going to strongly affect the rental market over the next 6 months and beyond.”
One broker even suggested that the new laws will slow affordable housing development, saying “the rent laws have turned every multi-family building into a liability. The affordable housing market will actually shrink due to good intentioned yet poorly planned rent laws.
This helps explain why the Residential Broker Future Confidence Index, which measures the six-month outlook, decreased 0.89 from the previous quarter. The impact of the regulations, as well as mansion and transfer taxes, combined with a lack of urgency from buyers, all combined for the negative outlook.
REBNY regularly surveys its residential and commercial brokerage division members to measure their confidence in the New York City real estate market now and six months from now. Survey results are published quarterly with a maximum index of 10.