New York has begun doing what any major city does when it runs out of real estate, but with great success. It has started increasing the rent for up to $5000 for a single bedroom apartment, not a better deal for an average family earning $100K a year. And to date there are no witnesses of slowing in the growth of the rental prices in this city.
The ever-taller high rises, extremely profitable to the owners relative to the forecasted construction costs, provide homes for escalating population. While single family homes that are put up for rent are typically larger, with private yards, the condos are barely 1000 sq. ft. but with views of the city and scenery to die for. Extra features such as gym, playgrounds, club house and concierges provide an interesting alternative to living here.
A two bedroom single family home in the heart of the city can cost around $6000 and as low as $750 in a suburban area outside the city, almost double the cost of what it was two decades ago. The downtown part has a rent of anywhere from $1500 to $2200 for a studio, and $3000 for a 2 bedroom, while upper east side-the affluent area where most skyscrapers are-can go as high as $10,000. Although the outskirts have seen a slight decrease in the influx of people after the recession, the very wealthy area have done very well in maintaining this price over the last ten years.
Reasons for Rent Increases :
There are various theories behind what is really causing the rental prices to increase in New York. And most prices are driven by owners and their agents convincing people to rent while justifying that they are seeing a completely rational price in comparison with the cost of owning a home. One can note that the recent rental boom has not been limited to New York but has been in full swing in other states such as California, Washington and North Carolina. The wealthiest cities and neighborhoods have experienced the greatest home appreciation recently, and these increases have outstripped rental growth in such markets.
Let us look at some of the theories that is driving the rental price here:
Theory 1: Demand and Supply:
People who are on an edge of buying houses in NY are seeing that housing and mortgage markets are imperfect, with real estate agents not representing the buyers interest and appraisers being paid to justify exorbitant prices. They are realizing that homes under this scenario are not worth what they were worth previously. Land is scarcer in the most exclusive communities and people renting would pay large premium for living in such communities.
Theory 2: Renting is Cheaper than Owning:
Renting is one way of showing that home prices cannot escape the fundamental forces that drive them in the long term-income. The housing prices have grown exponentially with respect to renting, and in this massive economy people are unable to pay large portion of their paycheck toward their house. People fearing the real trouble meeting their obligations in the future such as divorce, job loss and medical emergencies, want to post-phone buying and just rent for a while.
Theory 3: Population Growth and Immigration:
Probably the most popular reason as to why rent prices has seen an increase in recent years. Most new immigrants are renters and prefer to rent as long as they could save money to buy a home, resulting in more demand for rental properties.
Theory 4: Escalating Construction Cost:
Even though home builders are on the sell side of the market, they are unable to fair given the high cost of construction, compelling them to increase the price of houses to a level not reachable by an average middle class family- another economic reason that people are renting rather than buying. More so, builders claim that it is the zoning and building restrictions that are the culprit in higher rental prices.
Where The Current Rental Market is Heading:
Even homeowners with less leverage in their homes are now feeling relatively safe renting the houses given the current trend. Considering the shaky economy and no real income growth, people are beginning to dedicate their resources and attention to rent in an attempt to avert a real disaster from buying a house.
David Haynes is a writer who searched for the Lettings Bristol had to offer when choosing his home.
Tags: finance, financial growth, Growth, money, planning, Prices, real estate, Rent, world economy
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