Prices for apartment properties rose again in 2014 as investors bought a larger volume of properties than they did even in 2007—the biggest year of the last real estate boom for apartments.
“Investor demand for multifamily has not wavered at all,” says David Young, managing director for JLL.
The market for apartment properties has matured well past the recovery from the Great Recession. Investors are looking beyond the safest core markets to find higher yields from their investment. They are also looking much more deeply into the individual details of the properties they buy—from the local employment outlook to parking in the neighborhood.
“When we are out there in a go-go economy, we tend to get analytical,” says Young. So far, this analysis shows strong fundamental demand for many properties. “We feel that it is very sustainable,” says Young of the demand for apartments.
These strong fundamentals continue to draw new buyers. Investors bought and sold a total of $112.0 billion of apartment properties in 2014, up 9 percent from 2013, according to data from Real Capital Analytics, based in New York City. That record-breaking volume of sales is 7 percent more than the volume traded in 2007.
In the years since the crash, the volume of the apartment sales has grown tremendously, but the number of sales is unlikely to grow forever. The rate of growth has slowed every year. The volume of apartment properties sold doubled in 2010, rose by about one-third in 2011, increase by more than a quarter in 2012 and rose by roughly a fifth in 2013. In 2014, the increase was just over 9 percent.
That’s partly because the apartment industry is later in the real estate cycle than most other property types. “The rate of growth has slowed for a number of reasons including a lack of sufficient quality product in the market, limits on agency lending, and the ongoing decline in yields,” says Ben Thypin, director of market analysis for Real Capital Analytics.
Read More: http://nreionline.com/multifamily/record-sales-volume-and-high-prices-apartments-2014
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.