Portland apartments have had a good run of increasing valuation and higher rents — good for landlords, certainly. While the party might not be over, the prospect of higher interest rates and more local policy changes might put a damper on things.

Investors Management Group Northwest vice president Steve Morris, who specializes in multifamily investment sales, said the market may be reaching a leveling out of sales prices and rents. "The biggest item to be aware of are interest rate increases. Whether the increases will be a sustained trend is a question, but even so, we’ve probably seen the lowest rates already."

Demand for apartments in Portland, along with a lack of inventory, has driven cap rates lower, Morris said. But since mortgages affect return, any increase in rates will make buyers more deliberate and lessen demand. "We used to underwrite at 4%, but now assume 4.5%," he said.

"Potential property owners of Portland properties are also dealing with more onerous rules regarding rent increases in terms of percentage and advance notice, and a softening in high-end rents," Morris said. "We're projecting sellers may see a buyer pool taking a harder look and may not now get a 10% year-over-year value increase."

As for new construction, in addition to rising interest rates, the City of Portland is mandating a dedicated percentage on each new project (above 20 units) be income-qualified housing, or the developer will pay an additional fee. "However, this is positive for existing owners, since it’ll probably slow the growth in new inventory," Morris said.