Wealthy New Yorkers Flock to Renting, a Historical Phenomenon

The cost of buying an apartment in New York has skyrocketed to 25 times more than the cost of renting, a trend that has historically only been seen once before, in 2009. Wealthy New Yorkers are increasingly opting to rent instead of buy, with a waiting list to find units in high-end projects and monthly rents exceeding $15,000. This phenomenon is driven by a combination of sellers who are disaffected from the market peak, buyers' nervousness about the next couple of years, and a desire to keep cash on hand. The top 1% of the rental market, which represents the highest-end properties, has seen a doubling of activity in the third quarter, with 77% of respondents willing to rent.

Key Takeaways:

• The cost of buying an apartment in New York has risen to 25 times more than the cost of renting, a historic trend only seen once before in 2009.
• Wealthy New Yorkers, particularly those in the top 1%, are opting to rent instead of buy, with a waiting list to find units in high-end projects and monthly rents exceeding $15,000.
• The phenomenon is driven by sellers who are disaffected from the market peak, buyers' nervousness about the next couple of years, and a desire to keep cash on hand.
• The top 1% of the rental market has seen a doubling of activity in the third quarter, with 77% of respondents willing to rent.
• The middle ground of the rental market, with $3,000 to $5,000 per month rents, has seen a significant amount of activity, with people looking for new digs due to the lack of concessions offered by landlords.
• Developers of unsold condos are adding to the supply, which will take five years to work through the "shadow inventory" of unsold residential units.
• The current trend is expected to continue into the New Year, with a moving sideways scenario on the phenomenon, driven by the unemployment situation and the availability of credit.
• The market has not seen a rebound since the fall of Lehman in 2008, and it may take longer for the market to fully recover.

Statistics:

• 25 times: The cost of buying an apartment in New York has risen to 25 times more than the cost of renting.
• 77%: 77% of respondents in the top 1% of the rental market are willing to rent.
• $15,000: Monthly rents in high-end projects have exceeded $15,000.
• $3,000-$5,000: The middle ground of the rental market has rents ranging from $3,000 to $5,000 per month.
• 5 years: It will take five years to work through the "shadow inventory" of unsold residential units.
• 2009: The last time this phenomenon was seen was in 2009.
• 2008: The market has not seen a rebound since the fall of Lehman in 2008.

Sources:

• Jonathan Miller, President and CEO of Miller Samuel
• Bloomberg News, Deirdre Bolton, Host