The average U.S. gasoline price hit $4.71 per gallon in May this year. The prices of oil and gas have been rising steadily since the peak of the pandemic, and then skyrocketed after Russia attacked Ukraine in February. This, along with the associated rise in the inflation rate, has left many tenants and landlords wondering if the prices of New York apartments for rent will be affected.
Fuel Prices And Inflation Rate Soars
The record-high gasoline prices in May outpaced more conservative forecasts earlier this year. The rise in energy prices has been an ongoing trend since the rollout of vaccines and the economic recoveries that followed. The U.S. and other countries announcing reductions of, or bans on, Russian gas and oil imports also contributed. In March this year, the Brent crude price reached $127.98, slightly less than double the $68.87 it cost in December last year and far above the $19.33 April 2020 price.
Natural gas prices have almost reached 14-year highs, and one gallon of gasoline in the U.S. is roughly 50% more expensive than it was a year ago. This has helped feed the rise of the inflation rate, which increased 8.5% year-over-year in March – the steepest increase in more than 40 years. This could influence the prices of Manhattan apartments for rent.
According to reports, Credit Suisse Asset Management Global Real Estate Research Head Olafur Margeirsson said that inflation might be structurally higher in the coming months and years than it was in the recent past.
Knight Frank Global Research Head Liam Bailey said this could lead to property price gains slowing through the remainder of 2022. He explained that central banks are raising rates as a result of energy price-related inflation and that this was already impacting property price growth.
When mortgage rates increased in March this year, U.S. home sales dipped by 4% from February and by 8% compared to March last year; one of the first signs of the market slowly cooling down. This could have a ripple effect on the prices of NYC apartments for rent.
Rent Prices Increasing
Chief economist of the Zonda building consultancy, Ali Wolf said the challenges of rising gas prices and inflation, as well as the U.S. Federal Reserve’s plans to hike rates in the hope of slowing runaway prices, are making it more expensive not only to buy, build, or own homes, but also to rent them. The prices of New York apartments for rent are increasing along with the general cost of living, so while wages are growing, those paychecks have less buying power.
To put it in perspective, the prices of New York City apartments for rent are almost 20% higher than they were last year. Given the rising cost of NYC rental prices, some renters will be priced out of their homes or their preferred neighborhoods and will be forced to look for smaller homes or apartments for rent in New York City’s more affordable areas.
Another possible scenario is that the increasing prices of Manhattan apartments for rent could push some individuals to more seriously consider purchasing a home. Some may crave the predictability of the fixed monthly costs of a mortgage over the expected rent increases many see when renewing their lease.
However, not everyone is pessimistic. Columbia Business School real estate professor, Christopher Mayer said that rental prices could drop in markets that have become overheated, so the future isn’t all doom and gloom.
Whether you’re interested in buying or if you’re on the hunt for a new rental, contact Platinum Properties today.