We expect the 3 to 4 bedroom market to slow down in the 2016 year. Based on our observations, this slow-down will be felt on both a price and volume level, following the trend that we already see unfolding., both from a buyer and developer perspective. We’ve seen demand already slow for properties with larger footprints, and fall more in line with historical demand trends in the city that focus primarily on the studio and 1-bedroom segments. Note that, traditionally, apartments boasting 3 or more bedrooms have represented but a tiny fraction of overall demand, often falling in the single-digit percentage range – we think we will be reverting to this historical trend. In other words, the universe of buyers for 3 to 4 bedroom properties is tightening.
Conversely, we believe that demand for smaller units, especially studios and 1-bedrooms, will increase. This is at least partially driven by the lower overall cost of purchasing smaller units. We’ve also seen developers break up larger properties into smaller units, to meet these evolving buyer needs. We expect this trend to only gain momentum in 2016, both from a primary-residence and investor-owned standpoint. In the first owner category, those buyers previously priced out of the market may see this flattish market as an opportunity to at least grab a piece of the Big Apple with starter properties, to at least take advantage of low interest rates while they last. If they have a good broker representing them, they will quickly note that their cost of ownership is far more significantly impacted by higher interest rates than higher prices; therefore, even if prices remain flat for some time, purchasing now still makes sense in a rising interest rate environment. In the second owner category, we anticipate that investors will look downstream in their efforts of putting their money to work in order to generate some cash-flow and diversification.