Benefits of Buying NYC Apartments vs. Renting

If you're looking for a new home in New York City, you may assume that renting is the only practical option. However, with rent prices across the city breaking records every month, buying a place may be the way to go.

Considering that roughly 70% of New Yorkers rent rather than own their homes, it's easy to see why people assume renting is the only logical choice. In reality, though, there are many benefits to buying instead of renting an NYC apartment; read on to learn more.

Staggering Rent Prices Push Some Toward Buying

At the height of the pandemic, rent prices across the city plummeted, and landlord concessions abounded. By early 2022, though, landlords had the upper hand again. They probably will for the foreseeable future too, with vacancy rates at record lows and asking rents rising steadily from month to month.

Is Buying the Way to Go?

In just one year, median asking rents in Manhattan rose by more than 30%. Even if you lock in a lease in 2022, you're apt to face higher rents when it's up for renewal.

Instead of being left at the mercy of the city's chaotic, cutthroat rental market, you might want to consider buying an NYC apartment instead. Although the city's housing market is also in a bit of a tight spot, there are many advantages to buying instead of renting, regardless of extenuating circumstances. Given the current state of the housing and rental markets – and the economy in general – those who qualify to buy can broaden their reach by seeking apartments for sale.

NYC Rental Market Breaking Records Left and Right

One of the biggest stories these days revolves around NYC's ever-increasing rent prices. Since the start of 2022, demand for apartments has soared across all five boroughs as offices and schools reopen and life returns somewhat to normal.

In Manhattan, median asking rents increase by nearly 30% from May 2021 to May 2022. Even from April 2022 to May 2022, rent prices rose by 2%. To put this into perspective, average rent prices in NYC typically rise by around 3% per year. The fact that they increased by 2% in a single month highlights how competitive the rental market continues to be.

Current State of NYC's Housing Market

Home sales in NYC have been on fire too. Apartments for sale across the city, from Brooklyn to Upper Manhattan, have seen steady price increases and reduced inventory levels. These and other factors are converging to create a highly competitive market for those seeking to buy apartments in NYC.

Over the past year, the median sale price for homes in Manhattan increased by 10.7%. Meanwhile, inventory stood at just 4.4%. On average, properties for sale sit on the market for around one day.

To deal with the competitive environment, many New Yorkers are saving up cash to offer for apartments they want to buy. Cash buyers accounted for nearly 47% of those purchasing apartments listed for $500,000 or less. For properties listed at $5 million or more, 56% of interested parties were cash buyers.

Not surprisingly, bidding wars are relatively common for well-located apartments for sale in New York. However, bidding wars have become par for the course for not-regulated rental properties too, so they're just something people have to put up with for now.

Top Benefits of Buying Instead of Renting an NYC Apartment

If you're in a position to either rent or buy a home in New York City in 2022, you should seriously consider the latter option. Although home prices are near record highs too, you will recoup your investment after buying and have nothing to show after renting.

Some of the best reasons to consider buying an apartment in NYC include the following:

• Tax Benefits – By purchasing an NYC apartment, you may be eligible for tax benefits that help you save considerable money. For example, you can deduct property tax payments for your primary residence on your taxes. If married, you can deduct up to $750,000 worth of mortgage payments per year in 2022. You can deduct up to $375,000 worth of mortgage payments if you're single.
• Long-Term Housing – Many people who come to NYC don't stick around for long. With so many universities and business world headquarters, the city has many transients. If you're only looking for a place for a year or two, you're unlikely to enjoy the main benefits of buying a house. If you plan to stay put for at least five years, on the other hand, buying makes the most sense. When you're ready to sell, you should have a good chunk of equity and more leverage for making future purchases.
• Increasing Prices – As noted above, home prices in Manhattan increased by more than 10% in just one year. Median asking rents rose astronomically over the last 12 months, and that trend is expected to continue for some time. If you buy a place now, it should start appreciating rapidly. If you rent, you'll likely face a steep rent increase next year.
• Rising Mortgage Rates – Mortgage interest rates have been at or near record lows for several years. With inflation skyrocketing at a record pace, the Fed increased mortgage rates for the first time in ages in January 2022. The agency is expected to raise them again several times over the year. The sooner you buy, the more you'll be able to afford – and the less you'll pay for your mortgage.
• Strong Housing Market – Buying a home can be risky in many areas. There's often no telling how secure of an investment it is to buy property. In NYC, though, this isn't such an issue. Historically, the city has one of the most robust housing markets in the world. Demand is perennially high for homes in New York, so buying one is a pretty sure bet. You're unlikely to end up with a property that won't sell, so you can proceed confidently.
• Up and Coming Neighborhoods – Median list prices for homes in many New York neighborhoods are astronomical. Like many, you may be essentially priced out of many parts of the city. However, NYC is massive. Many up-and-coming neighborhoods have more affordable prices, including the East Village, Morningside Heights and Murray Hill. By focusing on parts of the city that are emerging as the next big thing, you can secure a home more affordably and rest easy in the knowledge that you'll have no trouble selling it down the line.
• Build Equity – There are perks to renting, to be sure, including not having to worry if significant repairs must be made. However, once you make your monthly rent payment, the money is gone forever – and you have nothing to show for it. When you buy an NYC apartment, on the other hand, you start building equity reasonably quickly. With values increasing steadily, you should be able to start chipping away at your principal balance fast. As you make improvements, your equity will grow even more, putting more cash in your pocket – and more security in your mind.
• Avoid Rising Rents – Most New Yorkers learn to live with paying higher rents every year. Rents typically rise by around 3% per year, but they've increased by double digits over the last year. If you're tired of living in fear of next year's rent payment, buying an apartment could be the answer. Although property taxes fluctuate, purchasing an apartment lets you lock in a steady monthly payment, making it easier and less stressful to survive in the Big Apple.
• Face Less Competition – Finally, most people looking for homes in New York City want to rent rather than buy them. You will face less competition as someone seeking to purchase an apartment than someone looking to rent one. You can stack the deck in your favor even more by having cash on hand. Either way, expect to deal with a bidding war – especially if you're looking in particularly in-demand areas.

Potential Drawbacks of Buying Apartments in New York

There are lots of great reasons to buy an NYC apartment in 2022. However, it's not the right choice for everyone. Some potential drawbacks include the following:

• Low Inventory – Lately, the inventory for homes for sale in NYC has hovered at around 4%. That's better than the vacancy rate for rentals, but it's still incredibly low.
• Locked In – As noted before, if you plan to stick around for at least five years, buying an apartment makes all kinds of sense. However, renting is probably better if you know you won't be here long – or aren't sure how long you'll stay. Thanks to the large cash outlay involved in buying real estate in NYC, you are unlikely to recoup your investment if you don't stay in your home for very long.
• Expensive – Finally, although rent prices are at a record high right now, buying a home in NYC isn't exactly cheap. In fact, you can expect to fork over approximately 10% of the sale price for closing costs. Therefore, if you buy an apartment in NYC for around $765,000 – the current median list price – you can expect to pay around $76,500 at closing.

Should You Buy an NYC Apartment in 2022?

Is it the right time for you to buy an apartment in NYC instead of renting one? The answer depends on you and your circumstances. Some considerations to make while deciding whether to purchase an NYC apartment include the following:

• Are values going up? – Before buying an apartment in the city, confirm that home values have been increasing – and that they're expected to keep doing so. When you find an apartment you like, check the sale history of nearby properties to see what the market has been doing. Since NYC is so vast, property values rise more steadily and reliably in some areas than others, so it's crucial to perform due diligence before proceeding.
• What condition is the apartment in? – You can save money by opting for a fixer-upper, for sure. However, if the apartment requires copious repairs and upgrades, you may want to pass it up for something better. In tight market conditions, buyers sometimes jump the gun, buying homes that need more work than they realized. Be realistic when assessing apartments for sale to ensure you don't end up in a money pit.
• Although there's something to be said for buying unique, off-beat homes, it's also vital to think ahead to when you go to sell. Does it have universal appeal? – When considering an NYC apartment for sale, ask yourself if it's the kind of place most people would like. Just because you're fine with it doesn't mean it will be easy to sell later.
• Is it in an in-demand area? – Is the apartment in a neighborhood on the rise or in an area that could be on a downward trend? Most NYC neighborhoods have strong housing markets, but that's not universally true. Be realistic about the apartment's location and whether it's an asset or a liability. For example, it may be a great place, but perhaps it's located above a busy, loud business.
• Are you ready to buy? – Finally, take a long, hard look at your financial situation to decide if you're really ready to buy. You'll need a solid credit score of 700 or higher and a stockpile of cash for closing costs. If you don't have either, consider renting for another year to repair your credit and save up extra cash.

Find NYC Apartments for Sale with BCP Real Estate Group

If you want to buy an NYC apartment in 2022, you're in for some work. However, buying one instead of renting brings many exciting benefits to the table, and it might even be easier than finding a place to rent. Connect with BCP Real Estate Group for resources to help you buy apartments across the city. We have you covered, from online rental listings to referrals to skilled, experienced real estate brokers and agents. Give us a call today for more information.