Apartment markets are turning a corner, and we now expect the sector to outperform over the five year forecast. As new supply drops back from the second half of next year, we expect a mixture of Southern metros and the major markets to see the greatest falls in vacancy over the coming years, although we think Phoenix will lead in that respect. On the other hand, Miami looks set to see the largest rise in vacancy, as new supply reaches more than 3% of inventory per year. As a result, we expect rents there to rise by just 2% p.a. in 2025-28, limiting the gain in capital values over the same period to around 3% p.a. But a handful of metros will see values grow by around 6% p.a., led by Phoenix. Total returns should exceed 10% p.a. in 2025-28 in Atlanta, Boston, Chicago, Dallas, Houston and Phoenix.
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