Apartment Rent Growth Strong, But Will Be Tested

MBA-NewsLink      By Michael Tucker

Apartment rents maintained their bullish growth in August, rising by $7 to a record $1,162, reported Yardi Matrix, Englewood, Colo.

"Perhaps more importantly, the numbers in August matched July's 6.5 percent year-over-year increase, which indicates that rent growth does not seem to be slowing down," said Yardi Matrix Vice President Jeffrey Adler.

But Adler said recent stock market volatility will pose a "significant test" to the apartment sector. "Although the major causes of the sudden 10 percent decline in stock values--the collapse of stock prices and currency depreciation in China, slower growth in emerging markets and fears that U.S. stocks were overvalued after a bull run--are not directly related to real estate, recent history demonstrates that exogenous shocks can play an outsized role in roiling the U.S. economy," he said.

Yardi Matrix predicted that U.S. multifamily fundamentals will remain strong despite the economic challenges in China and the Eurozone because of the demographic and demand trends that produced historically low U.S. apartment vacancy rates.

"There are potential upsides to U.S. real estate as well," Adler said. "One is that the Federal Reserve will maintain low interest rates, which, whatever the general economic impact, has helped to boost commercial real estate values. Another is that the instability elsewhere will lead global investors to allot even more capital to the sector."

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