Drop for first time in six years
Boston Herald - Jordan Graham - 06 January 2017
Rents in Boston have fallen for the first time in six years, according to a new report, as housing supply is finally starting to catch up to demand, analysts say.
Still, it is not clear whether the drop in prices is spread throughout the market or just a reduction in the most expensive apartments.
“My guess is that is from the upper end of the market, just because that’s what we’ve produced,” said Greg Vasil, chief executive of the Greater Boston Real Estate Board. “There’s a lot of people on the development side, a lot of the bigger developers are taking a pause right now.”
The average monthly rent for an apartment in Boston fell 1.7 percent in the last quarter of 2016 compared to the three months before, according to real estate tracking firm Reis Inc. It is the first time rents have fallen since 2010.
“The supply is finally starting to keep up with demand,” said Michael DiMella, managing partner of Charlesgate Realty Group. “We were way behind in new construction; it’s finally getting to the point where it’s catching up to the demand.”
Housing across the city has begun to come online after years when new units were slow to hit the market. At the same time, the Hub also has seen a surge in new residents. The city’s population has grown to an estimated 667,000, according to the U.S. Census Bureau, up 50,000 from the last census in 2010.
Last year, Simon Property Group scrapped plans for a 52-story luxury condo tower at Copley Place on Dartmouth Street, citing oversupply in Boston’s high-end apartment market. Even if the falling average price is just a reflection of the high-end market, lower rents will make their way down to middle-market housing as well, DiMella said.
“As higher-end rents start to come down, we see that impact the mid-tier segment,” he said. “I don’t expect prices to decline substantially, but hopefully we can build enough inventory to keep pace with demand and keep prices from appreciating dramatically.”
Even as prices decline, Boston is the fourth most expensive city in the country, after New York, San Francisco and San Jose. The average rent in the Boston market was $2,038 per month, according to Reis data. Compared to a year ago, rents rose 1.1 percent.
All four cities were among more than a dozen where rents fell last quarter. These markets, Vasil said, may have just hit their peak.
“It’s slowed up, it’s changing, but it’s not something that’s unhealthy,” Vasil said. “It’s part of the cycle.”