Chicago property values are facing some pretty strong headwinds.
Overall real estate prices dropped by 4.1% over the last year, according to a report by Real Capital Analytics, as cited by the Wall Street Journal.
It was the sharpest drop of any major metro city — including Hong Kong — which dipped 2.6%. That factored in commercial and residential properties. Despite showing a gradual increase over the last 10 years, the Chicago area property values are just barely above where they were before the Great Recession.
Adding to the bad news, Chicago’s residential real estate is among the weakest in the top 100 U.S. metropolitan cities, according to RCA’s data. Chicago saw a 1.5% rise in prices year over year, compared to the national average of 4.9%.
On top of that, the dollar value of commercial real estate fell by 42%, the report noted. In particular, Chicago area retail continues its struggles. Retailers like Sears have shuttered, creating big vacancies that have reached some of their highest points in the city in a decade.
Industry experts attribute the woes to several factors, including a decline in manufacturing and the Trump administration’s trade war with China.
But perhaps one of the biggest reasons is local property taxes. Chicago’s high vacancy rate and indications of residents leaving the city are leading to higher taxes, according to analysts. Cook County tax assessor Fritz Kaegi — who took office in April — has also changed the process of determining property values, in some cases leading to higher assessments. Recently, his office determined it won’t deliver a promised property tax break for the homeowners of hundreds of luxury homes built on floodplains.
One positive note: Because rent and property values haven’t seen much of an increase, they shouldn’t be hit as hard during another recession, one analyst told the Journal. [WSJ] — Jacqueline Flynn