• Average rental prices climbed for the 23rd consecutive month to $4,073.

• Average Condo prices in NYC are now around $2,662,100; while average prices reach $1.15 million.

• Buying is a better option for higher income earners, while rentals are a better short-term solution—for those living a couple of years in NYC.

New York City only keeps getting better!  Infrastructure projects keep improving, commercial spaces are more expansive and harder to reach, and demand for residential spaces has only become stronger, and more out of reach for most people. With up to 70% of new construction being in residential assets and prices increasing since 2010, nearly doubling per Citi Habitat’s latest research report.

While average rental prices climbed for the 23rd consecutive month to $4,073, vacancy rates are at their highest in nine years at 2.82% as of January 2016 figures, and Landlords are being forced to offer tenants more concessions on rentals. In plain English: Landlords are encouraged to pay OP—a 1-month broker fee bringing the rise to more No Fee Apartments to the market. This trend has increased by almost 8% in Manhattan. Even with this, Average rents are up 2.5%; since January 2015.

So should you rent or should you buy? The real question becomes, are you a real New Yorker? Personally, owning your own home is a part of the American dream and most people come to New York for an experience and leave after 2-3 years but they usually come back. The truth is from a long term point of view it is financially better to buy in the long term; especially, the higher your income bracket.

At $1.15MM (million), the average apartment needs around 20% down payment to acquire, and an 80% Loan-to-Value Mortgage to cover the rest. Rates today are averaging 3.625% APR for a 30-year fixed-loan, and the average rent is $4,073 (stated above), you will break even by your 10th year of owning your apartment—including all the closing costs at ~4%, maintenance/RE-tax, and figuring an average tax bracket of 28%, etc.  

Focusing only on luxury condos, we see a significant change. The average top 10% rental costs $10,673, which is up by 5.8% from the same quarter a year before. The average price of a Condo is around $2,662,100 (20% down payment: $532,420), which falls between the average price of a 2-Bedroom ($1,975,000) and a 3-Bedroom ($3,855,000) in Manhattan. Surprisingly, one benefits with a 4th or 5th year break-even—depending on minor changes in common charges!  

Why is this? Owning a home has various benefits: Real estate is an inflation linked asset, this is why brokers say RE prices always goes up—this changes if we had depreciation. Tax deductibility, speak with a CPA about how your monthly costs: RE taxes, common charges, and mortgage are deductible, and if you are a W-2 wage earner: you most probably cannot deduct your monthly rental, etc. And among various other reasons, fully owning your own apartment will make Manhattan a less expensive place to live; as, when you rent an apartment from an owner, they will probably price the apartment at a multiple (let’s say 4x) of their monthly costs to earn a profit!