If you want another reason why it’s often better to rent than to buy, even when mortgages are cheap, consider this: rents can go down. A lot.
A buddy of mine that works for a private equity shop is renting a one bedroom on the West side of Manhattan. He re-signed his lease for $3000 per month last June, $100 above the previous lease, but $100 below what the landlord was asking.
According to an ad on Craigslist, his building is now offering a similar unit for $2,390, plus a month free. That’s a net effective rent of $2,190.
That means the rent on his apartment has fallen ~27% in 6 months.
It’s happening in Singapore too.
Your editor signed a lease 18 months ago on a cosy little 900sqft 2-bedroom place, paying a mind-meltingly large sum of money for it. Now, an identical apartment just across the hall from mine is up for rent – offered at 20% less than what I paid a year and a half ago. Rrrggh.
And that’s just where the offer is. A tip for anyone who’s hunting for an apartment in Singapore right now – the market now is not like the market a year ago, where you had to pay 10% through the asking price to outbid all the other people fighting over a single apartment. These days, the landlords will look at bids 10% or 20% under the asking price.
With more and more supply coming on the market every day, rents are only going one way – and if rents are only going one way, then house prices are only going one way.