(Bloomberg) -- Renters in the New York City area are finally catching a break. According to a new report from listings website StreetEasy.com, rental prices are rising much more slowly than in recent years, with luxury apartments leading the slump. The price of Manhattan luxury rentals rose just 2.2 percent year-over-year in August, registering their slowest growth rate since 2010. That deceleration's happening at a pace that's caught even industry analysts by surprise. "I think we expected things to slowdown," StreetEasy economist Krishna Rao said in a phone interview. Still, "the pace has been a little bit faster than we expected." The data suggest rents are starting to reflect a trend that's already taken hold of the for-sale market. High-end property sales have been struggling so far in 2016, with an excess of supply causing some developers to divide apartments into two, abandon projects or even take listings off the market completely. One of the reasons for the spillover, according to Rao, is the rise of buy-to-let: if investors purchase apartments at a lower cost, they can rent them out at a lower cost too. According to StreetEasy, "flips" — or apartments sold and then rented on StreetEasy within 60 days — accounted for 12.4 percent of inventory in the luxury market in January-through-May.
The lower end of the rental market has been faring better, with prices rising 4.4 percent year-over-year for Manhattan's least expensive price group. This has helped hold up average prices, despite softness at the higher end. Pooling all segments gives Manhattan a 2.9 percent year-over-year growth rate last month, half of what it was a year ago but still well above the 1.9 percent growth seen in April.
The data also show local variation. Some areas of the market are still exhibiting strong growth, such as East Brooklyn and Midtown, while others are stagnating. Here's a look at how rents have changed in the past 12 months, broken down into different parts of the New York City area.
This trend may yet reverse. According to Rao and StreetEasy's own forecasts — which take into account factors including historical sales prices, incomes, and taxes — there should be a slight pickup over the next 12 months, with the company predicting a 4.3 percent increase in Manhattan rents over that time frame.
Rao tends to think the economy supports a modest recovery in prices. "I think we've hit an inflection point where the laws of gravity didn't feel like they were applying to the market, and now it feels like we're at a point where things are more sustainable. Incomes are encouraging, interest rates are still low, so I think those forecasts are well calibrated."
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