Canada Pension invests in US apartments as US property ownership declines
For the first time in over a decade, home ownership in the United States has dropped below 66%.
It is at its lowest level since 1998, according to the U.S. Census Bureau.
America’s home ownership peaked at 69.2% in 2004 but is now at 65.9%.
Analysts predict that the declines will continue for the next several years, due in part to stricter mortgage standards in more than a decade disqualifying would-be buyers and to rising volumes of evictions of home owners in foreclosure.
Director of research at John Burns Real Estate Consulting Wayne Yamano predicts homeownership may fall to 62% by 2015.
Not surprisingly, the accompanying home rental vacancy rates are also hitting new lows, with the national vacancy rate down to 9.2%, a 1.4% drop over the same time last year.
Meanwhile the internationally active Canada Pension Plan Investment Board has been investing in United States apartment buildings, a residential real estate sector that has managed to perform better than the broader housing market.
CPPIB has invested about $US300 million to buy stakes in eight U.S. buildings, as they are viewed as relatively safe cash-generating investments because weakness in the housing market drives former home owners to rent.
“We believe that the limited supply of high-quality rental properties and other broad demographic trends such as forecast population growth, declining home ownership and the echo-boom generation reaching peak rental propensity all support continued growth in the U.S. multi-family sector,” Peter Ballon, vice-president and head of real estate investments, told Steve Ladurantaye at The Globe and Mail.
The buildings include Archstone North Point, a 426-unit property in Massachusetts, Palazzo Westwood Village, a 350-unit property located in Los Angeles and a 45% interest in the Cadence multi-0family development project in San Jose, California.
CPPIB recently purchased a 50% joint venture interest in Northland Shopping Centre in Melbourne for a total equity commitment of A$455 million.
