Where is the next area of pain for commercial property markets? Ask analysts, investors and even the debt collectors responsible for chasing unpaid mortgages and there is usually one common answer: apartment buildings.
An end to the US government’s stimulus programmes, they say, alongside a moratorium on landlords evicting tenants, will lead to severe losses for investors.
The logic is straightforward. Tenants, deprived of government stimulus, are finding it harder to pay their rent. Landlords in turn will have less income to pay their mortgages. This is then amplified by eviction moratoriums in many states, which prevent landlords booting out tenants who can’t pay their rent.
Finally, reduced payments will hit investors that ultimately finance the properties through the commercial mortgage-backed securities market, where property loans are bundled together to back payments on new bonds. But, crucially, this hasn’t happened yet.
The first round of government stimulus, which included an