(Bloomberg) -- The Federal Reserve’s aggressive interest rate hikes are catching up with some home owners in New York City. 

The market value of single-family properties is projected to fall by about 3.4% citywide to $738.8 billion in the upcoming fiscal year beginning July 1, according to a tentative assessment roll released by the Department of Finance Tuesday. Manhattan homes are forecast to slump the most, by 5%, while Brooklyn home values are projected to fall 3.3%.

Overall, the growth in value of New York City’s 1.1 million properties is expected to slow as the decline in value of single family home prices is offset by rental buildings and trophy office towers. The projected rise of 0.7% for the next fiscal year would trail last year’s 6.3% jump. 

The US housing market has sagged as the Fed began hiking its benchmark interest rate in 2022 to quash inflation. Mortgage rates rose in tandem and homebuyers pulled back. Sellers, meanwhile were reluctant to move and take on higher mortgage costs.

“The decrease in single family home values is consistent with national trends, while rental building values were buoyed by continued growth in market-rate rents,” Department of Finance Commissioner Preston Niblack said in a news release. “One positive indicator was a resurgence in construction and renovation spending after three years of decline.” 

Homeowners in the boroughs should expect to pay higher taxes, in aggregate, as assessed values rose by 4.7%. Assessed values can rise — even if market values fall — because assessed values are catching up to previous market value increases. State law caps growth in assessed values to 6% from the year before or 20% over five years.

The city set a market value of about $1.5 trillion for residential and commercial properties and utilities. Citywide assessed values, which determine the value of property for tax purposes, are projected to rise 4.2% to about $299 billion. 

Property taxes are the biggest source of New York City’s revenue, providing about 30% of that for its current $110.5 billion budget. Commercial rent, mortgage recording and sales transfer taxes add another 3%.

Property values for fiscal year 2025 reflect real estate activity from Jan. 6, 2023 to Jan. 5, 2024, as well as income and expense information on commercial properties during calendar year 2022.

Property owners can see their tentative assessment via the Property Information Portal. 

Meanwhile, value for co-ops, condos and rental apartment buildings rose 5.3% to $370.4 billion. Brooklyn has the largest increase, 9.2%, and the largest billable assessed value increase.

New York’s office market remains weak as remote work and rising interest rates depress values. Office market values rose 3.5%, led by trophy buildings like One Vanderbilt, valued at $1.1 billion. The value of Hudson Yards — a new neighborhood of offices, retail and residential buildings on Manhattan’s far west side — rose to $6 billion, an 8.7% increase.

The total market value of commercial properties rose 4.4% to $329.6 billion and assessed values increased 3.5% to $133.5 billion. 

(Updates to add details on assessment values in sixth paragraph.)

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