Ever since the credit bubble burst, buying real estate has gone out of the rented window. Even the wealthier classes, those who can still afford to purchase real estate seem uninterested at the prospect of owning property. Now that it is clear to all that property prices are never on an uninterrupted ascent, and that they too can fall, many are preferring to take the rental route. And this holds true in the luxury sector as well.
With buying property no longer a priority, developers of luxury condo towers are looking to woo the rental classes instead. So you have all those luxurious apartments occupying tall towers in America’s biggest cities being rented out to people who lack either the financial clout to buy a luxe home or the inclination to invest in one. And renters appear all too willing to move in to these seven-figure indulgent homes with rooftop gardens, outdoor movie theatres and pampering areas for pets.
Take the case of Frank Gehry’s stainless steel Manhattan skyscraper. According to the initial plan, this tallest residential tower in the world was to include 200 condos for sale in addition to 700 rental apartments. But now, the developers of this Manhattan structure are offering all the apartments on rent. A basic 600-square-foot studio apartment would cost $2,630. The rates rise as per the apartment. An added bonus is that the rents are regulated, leaving no scope for thumping rent increases every year.
The rent boom has shown up in Chicago as well, where a 547-square-foot studio at the very posh Aqua designed by Jeanne Gang is available for $1,571 – not cheap, but certainly reasonable for the global rich.
There is also Three Sixty Residences in Silicon Valley. The property houses sleek luxurious condos, but even with their Bosch appliances and cabinetry by Del Tango, and despite being located in a millionaires hub, the sales office failed to make a single sale since 2007. With little option left, the developers are taking the rental route as well.
Another case in point is MiMA in New York, another condo project building that houses Hell’s Kitchen. From mid-March this year, 500 units of the 651-unit building were made available for rent. Already, 70 percent have been rented out at starting rents of $3,390. Plus, residents can access an exclusive, subsidized 24-hour Equinox gym.
New York writer Mark Simpson, who leased a 1,200-square-foot, two-bedroom apartment at MiMA recently for $6,400 a month, admitted that buying real estate no longer seems a good way to spend money. Brian Moynihan, CEO of Bank of America, also feels that several potential homeowners in the US need to do a rethink about buying property as a long-term investment option.
Meanwhile, conflicting reports about the state of the market and about property prices in general are convincing would-be buyers to steer clear of investments in real estate for the time being at least. Ownership rates are at a 10-year low currently with only 66.4 percent Americans being homeowners. Compare this to the high of 69.2 percent back in 2004. This may have led to higher rents, but according to Moody’s Analytics, renting continues to be cheaper than ownership in three-quarters of American cities.
Via: The Globe and Mail