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Multifamily cap rates drop as home prices soar

Thursday, April 13, 2017

Cap rates continued to fall to unprecedented lows for multifamily properties in the first quarter of 2017. CBRE analysts suggest rising homes prices in Canada’s major markets are a contributing factor, as investors see continued opportunities in the rental housing sector.

Class A high-rise stock recorded the lowest nationwide average cap rate at slightly less than 4.2 per cent, but rates trended downward in all properties. “The national average apartment cap rate in each of the high-rise B, low-rise A and low-rise B subtypes compressed by 6 bps (basis points), 2 bps and 7 bps respectively over the course of the first quarter,” CBRE reports.

Multifamily cap rates in Vancouver, Toronto and Ottawa are generally lower than the national average, with Vancouver once again at the low end of the scale. Class A high-rise in that city offers the lowest yields of any property type or market in the country with cap rates in the range of 2.5 to 3 per cent.

Calgary, Montreal and Halifax are positioned higher up the not particularly steep gradient with rates for Class A high-rise properties at 4.25 to 5 per cent in Montreal, 4.5 to 5 per cent in Calgary and 4.75 to 5.25 per cent in Halifax.

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