More households are choosing to rent US properties in the suburbs than city centres across the nation as a whole. In addition, the renter population continues to grow and outpace the supply of properties available to rent. These latest figures confirm the potential behind buy-to-let property in the US as this BRIC Group news article explains.
A report published in early March by NYU Furman Center and Capital One looks at rental tendencies in 11 of the largest metropolitan areas in the US between 2006 and 2014. The findings in Renting in America’s Largest Metropolitan Areas highlight several trends among renter households, of particular interest to those considering investment in US property.
Renter households up
The report found that the number of rental households in the US increased dramatically between 2006 and 2014. Over the 8-year period, 22 million more renters arrived in metro areas with all cities across the US seeing big hikes in the number of renter households. In 2006, 31 per cent rented a property, a figure that rose to 36 per cent in 2014.
Among those buying US property, there was also a tendency to let rather than occupy – rental property stock grew considerably more than the ownership stock. For instance, the number of rental units in Houston grew by 28 per cent in the 8 years, the second highest rate in the country. However, the number of renters in Houston went up by 37 per cent.
Suburbs grow in popularity
The report reveals that the increase among renter households in the suburbs is markedly higher than those in city centres in all 11 metropolitan areas. In 2006, 23 per cent of the population in suburban areas lived in rental property. This increased to 29 per cent in 2014.
This is clearly seen in specific metro areas. For example, there was no change in the number of renters in property in Miami city centre, but 400,000 more in the suburbs. In Los Angeles, 600,000 more renter households preferred the suburbs while those in the city centre grew by just 200,000.
Single family homes more popular
In terms of property type, single family homes are rising in popularity. In Atlanta, for example, the number of renters in single family homes went up by 11 per cent between 2006 and 2014. The same tendency was seen among single family home properties in Houston.
The experts believe this is due to two factors. Firstly, the ease with which you can convert a single family home from owner occupied to rental. And because renter households are growing and need more space. The average number of bedrooms in a rental property in the US has risen from 2 to 2.8.
Demand outpacing supply
Although there are more rental properties on the US market now than in 2006, the bigger rise in the number of renters means demand runs well ahead of supply. This can be seen in all 11 metro areas, and the report claims that this is a nationwide tendency.
Vacancy rates have dropped considerably since 2006. While cities like Dallas and Houston had vacancy rates of 13 per cent in 2006, these fell to 8 and 9 per cent respectively in 2014. The same pattern can be seen in the San Francisco property market where just 4 per cent of rentals were available in 2014.
Median rents up
In tandem with increased demand and reduced supply, rental rates have been rising. NYU Furman Center and Capital One find that the cost of renting a property in the US rose across the board between 2006 and 2014, although the biggest increase came in 2013-2014.
The report also reveals that rental rates rose more in suburban areas than they did in city centres. For example, rental property in Houston city centre went up by 1 per cent while rentals in the suburbs rose by 8 per cent.
These increases in rental rates have made property less affordable, although the report differentiates between the metro areas. Rental property in Washington, San Francisco, Los Angeles and New York is the least affordable in the country, while homes in Houston and Dallas are the most.
“This latest report confirms the general tendency among American households to rent rather than buy,” says Dies Poppeliers, Managing Director of BRIC Group. “We believe the findings highlight the investment potential in buy-to-let properties in the US generally with particular interest lying in single family homes in suburban areas.”
BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
Source: NYU Furman Center & Capital One