Why US multi-family real estate should be in your portfolio in 2024

Why US multi-family real estate should be in your portfolio in 2024

A recent report into property investment trends for next year finds that US multi-family real estate has “favourable long-term drivers”, including solid demand. With its chronic housing deficit, the US presents compelling opportunities for buy-to-let, particularly in the apartment sector. 

US multi-family real estate ahead of other sectors 

The latest Emerging Trends in Real Estate highlights the multi-family sector as one of the most solid investment options in 2024. The report by PWC finds that apartments in the US have “long-term demand drivers that should enable it to maintain steady performance”. 

As a result, the sector stands out in a real estate industry, where all segments have faced headwinds over the last year. According to the report, recent obstacles include soaring interest rates, rising expenses and the threat of an economic downturn. In addition, apartments have had to deal with “a surging supply pipeline”. 

However, despite these challenges, PWC says that “the tone in multi-family housing is much less negative than other segments”. Furthermore, it has “favorable long-term fundamental drivers”. 

The drivers 

Emerging Trends in Real Estate describes several of these drivers present in the multi-family sector. They include: 

Consolidated rent growth 

Although rental rates have stagnated somewhat this year, PWC points out they have experienced high growth since 2013. Rents have risen by 20 to 30% since 2020 and 80 to 100% over the last ten years. 

In addition, US multi-family real estate in some parts of the country has bucked the national trend this year. Florida is a case in point, with Miami emerging as the most competitive rental market and Orlando in tenth place.

Confirmed capital appreciation

Property prices in many parts of the US peaked last year and have seen stability or a slight downturn since then. However, according to PWC, real estate values have more than doubled during this property cycle and are now 20% higher than 2019.  

The Sunshine State shines yet again in this department, with Florida real estate providing investors with solid capital appreciation. Eight of the country’s top ten investment spots were in Florida in 2022, with investors enjoying over 80% in Fort Myers and Ocala. 

Lack of supply 

The multi-family sector has recently seen a surge in supply after the addition of tens of thousands of units nationwide. However, PWC claims this “recent bump in supply will one day be seen as a hiccup” rather than an underlying trend. 

Despite the new homes, the US continues to face a chronic lack of supply, currently at around 3.9 million units, and inventory continues well below demand.

Outlook for US multi-family property 

As a result of these “favorable long-term fundamental drivers”, multi-family investment in the US stands out as an investment asset. PWC finds that demand trends will remain in place in the long term because of continued household formation and less affordable homeownership. 

In addition, the report says that apartment investment has “a less-difficult path relative to other asset types” and has a strong outlook. This prediction rests on the fact that the US needs “more multi-family housing to meet the demands of the population and evolving lifestyle trends”.

(Source: Emerging Trends in Real Estate, PWC)