As the top sector in demand, competition for the high performing "flight-to-safety" product has been prevalent. The saturation and competition at the top of the market has been compressing yields, and driving investor demand for secondary and tertiary assets. The strength of the lending markets is fueling multifamily trades with Freddie Mac lending up to an 80 percent LTV ratio (based on the purchase price) for Class A in primary locations and a LTV ratio of up to 75 percent for secondary assets and locations.
"The apartment development pipeline has amplified and investor appetite for core multifamily properties has pushed towards peak levels. We anticipate a spike in transaction volume as sentiment toward risk aversion fades, investors pursue higher yields and entrepreneurial value-add strategies re-emerge," said Jubeen Vaghefi, Managing Director and leader of Jones Lang LaSalle's Multifamily Capital Markets business. "While investor appetite is strong now and will remain so in 2013, the compounding occupancy and rent growth the multifamily market is experiencing now may begin to lessen in 2015 and beyond."
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