Buying an apartment in Manhattan is not just more expensive than elsewhere in the city – it’s also significantly overpriced compared to renting.
A median homebuyer in Manhattan would need to own an apartment for 7.4 years before owning becomes cheaper than renting, according to a new study by StreetEasy. The national median is 1.9 years.
The listing site calculated its comparison of the annual cost of renting and buying by including factors such as inflation, tax deductions, asset appreciation, opportunity costs of investing in a home and rent increases. On aggregate, these cost factors decrease over time for a homebuyer relative to a renter, meaning after a certain number of years owning becomes cheaper than renting. The greater number of years it takes, the more expensive a for-sale market is compared to rentals.
The Manhattan median of 7.4 years illustrates why developers have been so keen in recent years on building condo towers or converting rentals to condos: for-sale apartments command a significant premium compared to rentals. The median number of years until the “tipping point” – as StreetEasy calls it – is reached is a mere 4.6 years in the Bronx, 4.4 years in Brooklyn, 4.1 years in Staten Island and 3 years in Queens. The citywide average is 4.9 years.
There are significant variations within boroughs. In Tribeca, the tipping point is a staggering 31 years but in West Harlem it’s a mere 1.2 years. And Brooklyn’s average of 4.4 years may seem low compared to Manhattan, but median homebuyers in Boerum Hill will have to wait 16.4 years until owning becomes cheaper then renting.