S&P Global Ratings expects Japan's apartment loan residential mortgage-backed securities (RMBS) to remain steadfast despite a difficult economic environment, according to a Thursday release.
The rating agency attributes the stability to strong rental income generated through long-term leases.
The pace of decline for the rent levels of properties underlying the RMBS has also been slower than the broader market average, S&P said.
However, rising interest rates could potentially strain loan repayments and negatively impact apartments' performance, according to the rating agency.
In the long term, demographic shifts affecting rental income and a potential imbalance between supply and demand for rental housing could further pressure the overall performance of apartment loans, S&P said.
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