Yes, we all know New York real estate is expensive. But why is that?
People give all sorts of reasons: it’s the cost of doing business, the fault of greedy property owners, or something about the economy. In reality, the issue is much more complex. It’s a combination of both internal and external influences, time, popularity, inflation, and a million other things.
And if you want to live here, you have to deal with all of it.
Let’s take a look at why New York real estate is so expensive, and what you can do about it.
First off, how expensive is NYC really?
This isn’t an entirely fair question. New York City is a big place, boasting a population of about 8.5 million people split over 5 boroughs. It’s no surprise that the price of housing is going to be wildly different in downtown Manhattan than it is on the outskirts of Queens.
That being said, averages still help paint a picture of the New York real estate discrepancy. For instance, a 1 bedroom apartment in New York City averages $3,017 a month. Compared to the rest of the United States, where the national average is $1,062, New Yorkers are paying almost triple.
Of course, New York is a coveted place to live, but that doesn’t paint a full picture. So what is causing this high-priced issue?
Lack of space
New York one bedrooms aren’t only expensive, they’re small. A one bedroom in New York is about 750 square feet. Compare that to the national average which, while on a decline, is still 934 square feet.
But the lack of space thing isn’t done out of cruelty, it’s done out of necessity. New York, unlike most cities in the United States, is a collection of islands. As such, its city limits are very sharply defined. That means a much denser population than most cities, with about 27,000 people per square mile.
In addition, certain neighborhoods want to stay small. While Midtown and the Upper East Side are known for their highrises, the East and West Village are known for being (unsurprisingly) villages. That’s actually one of the things that makes them so economically viable.
Time and popularity
New York City was not the nicest place to live in the 1980’s. Riddled with crime and drugs and just dodging bankruptcy a few years prior, it wasn’t the paradigm of safety and prosperity it is today. Gentrification was a powerful force, converting neighborhoods that some deemed “unlivable” because of their conditions into neighborhoods that most deem “unlivable” because of the price.
Case in point: Williamsburg. In 1983, a 2 bedroom in Williamsburg went for $330/month for the entire apartment. If you fast forward three decades, 1 bedrooms now can go for $3500. Inflation is one thing, but that’s over a tenfold jump with a loss of a bedroom.
Astoria is a similar story. In the last decade, people have seen the price tag of apartments jump hundreds of thousands of dollars. The once middle-class neighborhood is now forever transformed.
Foreign investment
Business Insider recently posted this shocking statistic: “30% of all apartments between 49th and 70th Streets and between Fifth and Park Avenues are vacant at least 10 months of the year.”
How is this possible? A lot of it is due to foreign investment. Because New York real estate is such a constant return on investment (some call it the new Swiss Bank Account), a lot of space is bought but never used.
So, what can I do?
Don’t worry, the situation isn’t hopeless. The beauty of New York real estate is that, while expensive, it’s also not expensive everywhere. Even in Manhattan, you can find apartments at reasonable prices.
Take an area like Inwood or Washington Heights in Upper Manhattan. These up-and-coming neighborhoods have two bedrooms available for as low as $1,700/month. Or there are places like Hamilton Heights (also in Manhattan) producing studios that go for only $1,500.
But, just like everything good in New York (and life), these offers won’t last. So make sure you take advantage of them while you still can.
