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Manhattan investment condos yield lowest rental income in six years, report says

Manhattan condo investors who rent out their homes now earn just slightly more than the yield they would have received from relatively risk-free, 10-year government Treasury notes, according to a new analysis.

Condo owners who posted rental listings for their Manhattan units during the second quarter of 2017 are on track to collect, through rent payments, a median of 2.5 percent annually of the total amount they spent on the home, according to a StreetEasy analysis released Monday.

This 2.5 percent rate is the lowest return on investment through rent since mid-2011 and comparable to what people purchasing government debt can expect to earn, the study noted.

Rental income has declined because more expensive homes have entered the market, and housing prices have risen faster than rent rates on comparable units, according to StreetEasy senior economist Grant Long.

Despite the declining rent yield, Long said he did not notice a shift in the number of people investing in condos and then renting them out when tracking 8,000 Manhattan condos sold between January 2010 and June 2017.

Investors may be speculating that their condo’s value will continue to rise, allowing them to reap a profit when reselling it later.

Investors are still bullish on the New York property market, Long said. “There is a financial aspect and the expectation that New York City will continue to be a global hub of business and finance and arts and culture,” he said. “But there’s also an aspect of New York City real estate being a prestige property to hold on to.”

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