US rental properties are a top priority for baby boomers who now represent a significant proportion of those renting rather than buying. As this BRIC Group news article reports, this has big implications for the market generally and reinforces the potential for buy-to-let investment in US property.
According to a recent US Census and American Community Survey, over half of homebuyers aged between 55 and 64 are not buying property. Some are staying in their current home but a growing number opt to downsize and sell up larger properties in favour of renting smaller homes.
Big baby boom for rentals
“We have found a sharp swing towards moving to rental units compared to homeownership among the 55-plus population,” said Paul Harrington, director of the Center for Labor Markets and Policy at Drexel University. According to his figures, in 2000 the proportion of older movers opting for a rental home represented 52.5 per cent of the total. In the period 2013-14, this increased to 63 per cent.
The big baby boomer generation (those born between 1945 and 1964) makes up an important part of buyers of property in the US. With around 10,000 of them retiring every day, many are looking to downsize, the new watchword for the current trend of swapping ownership of a large property for rental of a much smaller one.
Luxury properties in demand
Baby boomers also turn out to prefer luxury properties with demand on the rise for high-end homes, both in the rental and resale market. According to the Boston Globe and The Washington Post, realtors are reporting more call for this type of property within the older age bracket. In addition, the wealthiest section of American households accounted for around 33 per cent of all new renters in the period 2011-2014.
Baby boomers stand to gain large tax advantages from downsizing to a rental property. According to US tax law, the first US$250,000 from the sale of a property is exempt from taxes provided the seller occupied the property for at least two out of the five years previous to the sale. This amount is doubled in the case of married couple who file a joint tax return. This represents an important boost to many retirement funds plus an incentive to sell and then rent.
This trend for rentals among baby boomers reflects the general tendency away from homeownership seen at nationwide level. It also puts added pressure on the already tight rental market.
New York City high and Houston low
A recent survey by Rent.com looked at average monthly rates for 1 and 2 bedroom apartments in ten of the largest cities in the US. The results placed New York City and Boston as the two most expensive cities. The average rent for 1-bedroom apartments in New York stands at US$3,044 a month while the average for 2 bedrooms is US$3,856.
At the other end of the scale is Atlanta, a city where apartments are also the most spacious. Rental property in Houston also ranks well on size and relatively low rental rates. According to Rent.com, average rates for 2-bedroom apartments in Houston are currently US$2,427. Miami property is another winner and described as “a renter’s dream” by the survey with large apartments for low rates.
“These findings reiterate the strong potential behind buy-to-let property in the US,” comments Dies Poppeliers, Managing Director of BRIC Group. “Demand is consistently growing at all levels of society and shows no sign of slowing down making this one of the sectors with the biggest capacity for growth in the market.”
BRIC Group, specialists in global property investment, offers real estate opportunities in the US and Brazil. These include turnkey property investments (many with tenants in place and a 2-year rental guarantee) in Florida and Houston in the US. They are also developing their own 5*, award-winning resort The Coral Brazil, a Lake and Beach resort in Ceará, Northeast Brazil.
Sources: Boston Globe, The Washington Post