Posted by Leonard Steinberg on May 3rd, 2013

The one thing that almost guarantees that real estate will continue its upward pricing trend is the fact that big city inflation is quite different from the rest of the country’s (I believe artificially deflated) inflation figures. Did cab fares go down during the recession? Food prices? Health care? Rent? Of course not……in fact the GREAT RECESSION saw some of the biggest increases in inflation numbers ever…..many in areas that our beloved government does not consider of being worthy in their inflation calculations. Can you really believe they omit the cost of housing from their inflation figures, surely the biggest expense any New Yorker deals with?

This week we opened a window into the costs of operating New York City as Mayor Bloomberg revealed his final budget: health-care expenses are expected to jump a staggering 38% over the next four years while pensions are consuming $8.3 billion next year. The deficit for fiscal 2015 — the first budget that would be overseen by the next mayor — was estimated at $2.2 billion. When he took office in the aftermath of 9/11, Bloomberg was staring at a hole of almost $5 billion in a $42.5 billion budget…..this years budget is $ 69,8billion. So the budget has risen an average of over $ 2billion per year over the past 12 years…..or over 4% per year……thats close to double the ‘official’ inflation rate.

Some examples:

Gasoline cost in the year 2003:          $ 1.66/gallon………2013:  $ 3.85/gallon…..that’s over 7% per year.

1 bed apartment at 39 Fifth Ave:         $ 670,000 in 2003…2013: $ 1,2m+……..thats over 6% per year.

So they say our inflation rate is around 2%…..don’t believe it. And while the discrepancy between government estimations and reality is pretty startling, this inflation makes ownership a very good prospect as the real estate escalates with inflation and you avoid those pesky rent increases…..the again maintenance, common charges and real estate taxes don’t ever go down either!