NEW YORK CITY—The Federal Reserve is expected to raise short-term interest rates this week, and New York City real estate executives are divided as to what the impact would be on property values and real estate development here.

Forty-one percent of industry professionals say condo and co-op values will decline if the Fed raises rates, while 34% say values will stay the same, and 18% say they will actually go up.

That's according to accounting firm Marks Paneth's latest Gotham Real Estate Monitor, a survey completed last week of over 130 New York property owners, brokers, engineers, accountants and lawyers.

Meanwhile, 50% of the property executives say an interest rate hike will slow the rate of new condo and co-op development in the city. Forty-one percent say a rate increase won't slow such development, and 8% aren't sure.

But the majority—62%—of executives say a rate jump will not curtail foreign investment in New York condos and co-ops.

"Given how sensitive property values are nationwide to interest rates, New York property executives' divided view on the impact in the city of a rate hike suggests that they perceive the condo and co-op market to be pretty solid," says William H. Jennings, partner-in-charge of the real estate group at Marks Paneth. "And it seems that professionals believe that foreign investors in New York apartments are hard to scare away."