Why Buy When You Can Rent for a Fortune?
With $300,000, you could buy an above-average house in Worcester, Mass.—straight cash. Or you could spend a week in the Caribbean at Richard Branson's Necker Island, the world's most expensive rental property.
Though they could easily afford to buy an extra house or two, today's super-rich seem to have no trouble handing over tens, or even hundreds, of thousands of dollars a month to landlords for a temporary residence. They're willing to splurge even more on vacation rentals like Necker, which costs $46,000 a night for the entire 74-acre island—complete with a nine-bedroom "great house," which comes with a kitchen and private chef, fully stocked bar, snooker table, piano, entertainment system, and outdoor terrace, as well as five one-bedroom private houses.
Today it's not that strange to find rentals listed in the $20,000-plus range, especially in expensive cities and resort areas. This is partly because rents in general are on the rise: In the U.S., the average asking rent is nearly 8% higher than it was two years ago, according to New York real estate analyst Reis.
The Rich Get Richer
Thanks to a strong global economy, people today also have more money to blow on non-investment property. According to the most recent World Wealth Report compiled by Merrill Lynch (MER) and consulting firm Capgemini Group, the combined wealth of those with more than $1 million in investable assets rose more than 11% in 2006 to $37.2 trillion—the first double-digit increase in seven years. The number of "ultra high-net-worth" individuals (investable assets of at least $30 million) jumped 11.3% in 2006 to 94,970, and their asset pool increased by 16.8% to $13.1 trillion.
"The $20,000 rental is not such an unusual thing anymore," says Stephen Kotler, an executive vice-president at Prudential Douglas Elliman in New York City. In the past two years, Kotler says, rentals at both the $20,000 per month level and the $40,000-plus level have increased in number in Manhattan. There you can pay up to $120,000 a month, the going rent for apartment 33A at the Waldorf Towers, which has been home to both Frank Sinatra and Cole Porter. The Waldorf Towers are the super-luxury, high-security, residential component of the Waldorf-Astoria Hotel, which is owned by Hilton Hotels (HLT).
Since the housing market in Manhattan has been and continues to be very strong, there is a shortage of four- and five-bedroom apartments or townhouses on the market, pushing rents on the few available rental properties up even further, Kotler notes.
The Ease of Leasing
New York is now the third most expensive city for renters in the world (based on rent for a three-bedroom house or apartment), according to London-based human resources consulting firm ECA International—only Hong Kong and Tokyo are more expensive. Rounding out the rest of the top 10 are Moscow, Seoul, London, Mumbai, Shanghai, Caracas, and Paris.
Why would anyone spend the equivalent of the average down payment on a home, or even the average home itself, on just one month's rent? Many big-spending renters just need a place to stay while their primary residence is undergoing renovation. In major world business centers such as New York, London, or Tokyo, renters may be partners or managing directors coming from overseas on a temporary, work-related move. Since they may only plan on staying for a few months or a year, they usually don't want to go through the trouble of buying, caring for, and selling a home.
Expensive vacation rentals are another story. But the high price tags on these lavish properties probably don't need much explanation. At Nygard Cay in the Bahamas— the second-most expensive rental in the world, at $40,000 a day in peak season—visitors are completely taken care of by a staff of 20 and treated to extraordinary amenities and activities.
Best of Both Worlds
"You can jump in the Hummer and have the chauffeur take you to the casino, watch a movie on a 20-ft. screen, or go 12 minutes away and there's a shark-feeding every night at 6 o'clock," says John Greer, chief executive officer of Richmond (Va.) Web site Unusual Villa and Island Rentals, which markets the Nygard Cay property.
The privacy factor is also a big draw for exclusive rentals like Nygard, which has hosted celebrities Oprah Winfrey and Robert De Niro and is a popular choice for weddings and retirement parties. Unlike a resort, a rental can be as private as you want it to be. "You don't have to listen to other peoples' music at the pool," says Greer. But you're still free of the responsibilities that come with owning a home—and that's a luxury that (literally) can't be bought.
Looking for a temporary palace or just want to snoop? Click here to see the most expensive rentals in the world.
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