Islands’ rental prices dropping

Saipan’s ongoing economic downturn is prompting scores of local landlords to drop prices in a bid to stand out among the hundreds of starkly vacant rental properties available on the island.

The decline in rental prices is visible every day in housing advertisements and appears to have even prompted one commercial property on Middle Road to advertise “Free Rent”—at least free for the first two months of a one-year lease—in a banner across the front of the building.

Price cuts appear confined for now to the low end of the rental market—where prices in many cases have dropped $200 to $400—while rents on the island’s pricier apartments are holding steady, some real estate agents report. However, others note the trend has also emerged in the high-rent residential and commercial sectors.

Landlords attribute the drop to a perfect storm of factors like skyrocketing gas prices, the recent hike in the local minimum wage, mounting utility costs and an exodus of local residents searching for off-island job opportunities as many local businesses fold.

“Rents for everything, commercial property and apartments, are going down,” one informed real estate expert on the island said, speaking on condition of anonymity. “All of these factors combined have meant economic suicide.”

Projections previously suggested increases in the local minimum wage might have boosted the island’s rental market and other segments of the economy over time despite a short-term slump, the expert added. Compounding the wage hike’s impact, however, was a rapid jump in the local price of gas that had a “ripple effect” through the economy, resulting in higher costs for consumers and driving many prospective renters to seek cheaper housing.

Statistics on the price drop in rents from the CNMI Department of Commerce are unavailable. The most recent consumer price index data from the department shows a decline in the combined cost of housing and utilities in the Commonwealth by 3.9 percentage points since the fourth quarter of 2007.

Nevertheless, real estate agent Tim Goodwin of Pacific Rim International noted rents on commercial property have dropped after the island’s economic downturn left the market “saturated” with vacancies, but rent on the island’s upscale properties appears to be “holding firm” for now due to a fairly consistent level of consumer interest. Rents on inexpensive apartments are also down, he said, as more and more people leave, fueling a strong “renter’s market.”

“The root of this is the economy and part of the fallout, people leaving,” Goodwin added, a point upon which several other real estate agents agreed.

In spite of the price drop, the prospects in Saipan’s real estate markets still have some rental agents and brokers optimistic that conditions could attract new investors banking that the economy will later revive.

“Now is the right time for people who have the means and the money and want to put in the investment,” said Mustafa Shakir, chief of Shakir’s Realty, adding that Saipan has seen increasing interest from Korean investors. “In any economy, there’s opportunity.”

Among his stock of apartments, prices on some two-bedroom units have dropped for the moment, Shakir noted.

Meanwhile, the climbing cost of utilities has many people looking for apartments with electricity, cable and other amenities included in the price before they will sign a one-year lease.

“People are trying to negotiate and they’re looking for added benefits,” he said. “This is normal in a market where supply is high.”