Apartment Investment Loan Quality
Apartment investment and loan quality ratings of new loans on US apartment properties saw a drop in the second quarter of this. This increases the risk of price declines on multifamily properties in the event that rent growth stalls. According to a new study, the rate of rental income relative to loan balances fell year on year to 8.7% for high rise apartments in the US.
This rate is particularly disturbing given the fact that it rarely fell below 12% during the four decades leading up to 2006. The rate began to plunge just as the housing market peaked in this year. Commercial property, including apartments, in the large US coastal cities have led a nascent recovery in US commercial real estate as investors reach for yield. This buying has pushed up property values while rents have failed to keep pace.