Based on statistics through June, the vacancy rate for apartments will nevertheless remain at only about 3.5% – the lowest it has been since 2008 – through the end of this year, M & M predicted.

M & M’s Jersey office report laid this to continuing uncertainty in the residential for-sale market, stemming from overall economic uncertainty and the rising tide of home foreclosures in the state. After the hold on court foreclosure actions following the “robo-mortgage-signing” scandal was lifted this year, foreclosure rates have risen sharply.

“In Bergen County, for instance, the number of residents facing foreclosure surged by 79 % in the last 12 months, while actions doubled in Essex and Passaic counties,” the report noted.

Under these conditions, landlords will have the leverage to continue boosting rental rates, which have already hit new highs in 2012. By year’s end, average asking rents will reach $1,366 a month, says the report. Effective rents will jump 4 % for the year to $1,311 a month. Last year, effective rents were up 2.3%.

Meanwhile, fierce investor competition for the best properties in areas closest to Manhattan will keep investor’s capitalization rates compressed near 5%. Competition in the north is increasing driving “risk-tolerant” investors to older and distressed properties along train lines in Essex County, and smaller investors to central and South Jersey, M & M reported, saying the trend will continue.

Older buildings near major roads or colleges will continue to be the most likely targets for the value-add buyers, who may reap up to 30 % gains by improving and then refinancing their properties, said the firm.