New York City’s Budget Office Expects Sharp Decline in Real Estate Sales

NEW YORK CITY—New York City’s Independent Budget Office has understandably had to make some revisions to its pre-COVID budget and among the changes is an expectation that real estate sales will drop considerably this year. 

It now expects collections from the real property transfer tax to fall by about $240 million next year to $976 million, according to recent testimony by Ronnie Lowenstein, the director of the budget office at a finance hearing before the York City Council Committee.

In general, he said, the office’s new economic forecast and projections for tax revenue and spending “tell a far grimmer story for the city. We project the city has a budget gap of $544 million that must be closed in the two months remaining in the current fiscal year,” Lowenstein said.

“We also estimate a shortfall in the upcoming fiscal year of $830 million and a budget gap that balloons to nearly $6.0 billion in 2022, just 14 months from now.”

In its previous forecast the city had projected that real estate sales for 2020 would total just under $100 billion, similar to the $99.8 billion level of sales recorded in 2019. It now projects that sales will be around $65 billion, a decline of more than one-third. IBO forecasts a recovery in sales beginning in 2021, but it does not expect sales to rise above the $100 billion level again until 2024.

“In the wake of this crisis, the long-term attractiveness of New York City as a place to live and do business is very much an open question,” the report said.  “At a minimum, prices of both commercial and residential property are likely to remain below the record-breaking levels of recent years for a considerable period.”

IBO also forecast the city will lose 475,000 jobs from the fourth quarter of calendar year 2019 through the fourth quarter of this year. Four out of every five of these job losses are projected to occur in the current quarter, the months of April through June. Nearly 60% of these lost jobs will be concentrated in just two industries: trade, particularly retail trade, and leisure and hospitality. In addition, by the end of next calendar year, IBO thinks that the city will have only regained about 20% of the lost jobs. “It will take two more years before employment in the city reaches pre-pandemic levels,” it said.