Manhattan property price to rent ratio from Manhattan's analysis guru/blogger Jonathan Miller of MillerSamuel. A price to rent ratio is median price divided by median rental price and this shows how many years' annual rent it takes to buy property at a certain point in time. The chart shows that the historical price to rent ratio in Manhattan, New York is 16x. In 3Q'11 it was 25x.
If trends always revert to the mean (go back to normal levels), the current price to rent ratio would have to go down to closer to 16X. This means either
(a) rental prices in New York are expected to rise which is quite likely since rents have been stable for a while.
(b) sale prices decreasing but I personally feel that's less likely since sale price appreciation has been going up consistently along with inflation, not going up in outrageous fashion.
Wei Min Tan in Managing Director of Castle Avenue Partners, focusing on foreign buyers interested in buying Manhattan, New York property. He has appeared on CNN, New York Times and the Wall Street Journal on the topic of foreign buyers of Manhattan property. Wei Min speaks Cantonese Chinese, Malaysian and conversational Mandarin. He can be reached at email@example.com