What do you think about the author\'s contention that Multi-family demand should

Question

What do you think about the author's contention that Multi-family demand should increase? How does tax policy inform your choice? What if the deduction for home interest would be eliminated?

Is Growth in the Multifamily Sector Sustainable? Nov. 13, 2013By Michael Bul The multifamily market, the so-called darling of commercial real estate, isn't losing that title any time soon. The third quarter demonstrated once again how stable the sector is, as occupancy held steady and rents continued to rise, albeit at a more normal pace. Those were a few of the points made during the most recent episode of the "Commercial Real Estate Show." My guests and I discussed the factors affecting the sector, property-level performance expectations and investment strategies for this point in the cycle. Millennials enter the job market The continuously improving economy and job market are sustaining the multifamily market's success. "The people who are getting jobs are the young professionals that typically rent an apartment instead of buying a house," said Ernie Eden, vice president of Bull Realty's Apartment Group. "Demographics are the key factor driving the multifamily market," said Jay Parsons, national market analysis manager for Real Page Inc. "The Gen Y Millennial renters will eventually buy homes, but not until later. They are getting married later and prefer the mobility that living in a rental gives." A large pipeline of upcoming college graduates will soon be looking for apartments as well, Parsons added. "Apartment demand should be strong during the next decade due to strong demographics." More normal occupancy and rent growth The multifamily market is on pace for a similar year to 2012 in terms of absorption and rental rates, Parsons said. In the third quarter, 47,000 units were absorbed nationwide for a year-to-date total of 163,000, he added. Rent grew by 1.1 percent quarter-over-quarter for total rent growth of 3.2 percent year-to-date. "We are getting back to a more stable multifamily market," Parsons said. "We are going from a peak market to a more normal growth pattern." While class-A properties lead the way coming out of the recession, class-B properties are experiencing an uptick in rents as well, he added.

Explanation / Answer

1. What do you think about the author's contention that Multi-family demand should increase?

Here in the given case author's contention about Multi-family demand due to demographics factor certainly will increase. The young professionals are going to get higher job rates. These young professionals will certainly look for the apartments instead of buying a new house. Here demographic factor plays importantly to go prefer apartments. Young professionals will get marry after few years from the date of their new job. After getting married also they usually plan for higher opportunity to earn more by shifting their place for their career development. They tend to see jobs in other countries where they can get more opportunity to earn higher. By all these time these people look for rentals. And most importantly multifamily is safe for people considering with demographic factor. Hence there is always an increasing trend for multifamily demand in the real estate business that is apartment demand should be strong in the next decade.

2. How does tax policy inform your choice?

Tax policy always benefits for real estate business to grow. The people who are interested in buying apartments or house can also get finance facilities and loans from various financial suppliers including banks. These attracts the benefits from tax policy. Professionals who are earning high returns might prefer for buying new apartments in order to get tax benefits.

3. What if the deduction for home interest would be eliminated?

If deductions for home interest would be eliminated also there wont be any adverse effect for multifamily demand. Growing trend of jobs for young professionals always have a multifamily demand either in form of rentals or own apartments. In all aspects demographic factor should have a greater influence in multifamily demand.

4. Is grown in the multifamily sustainable?

Yes, of course!!! Young professionals should move from one place to another for their development. After their marriage also they should lead a good family life and which is safe life. Hence there is always a growth trend for multifamily demand and the demand is sustainable. But here because of IT developments in various regional areas the demand for multifamily apartments in certain places or in the metropolitan cities have a strong thing at the same time demand for multifamily apartments also will increase in other cities where ever there is growth in IT and other sector developments presents.

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