Residential investment in the Netherlands reaches record in 2018

10 July 2018

Residential investment reaches record in 2018

In the first half of 2018, 3.5 billion euros were invested in housing in the Netherlands. Never before has the investment volume in rented homes been so high in the first half of the year. According to Capital Value, specialist in residential real estate investments in the Netherlands, it is expected that all records on the residential investment market will be broken this year with a total volume of 6.5 to 7 billion euros for the year as a whole.

Despite the increased building costs and the insufficient number of building permits, 40% of the volume was invested in new-build output or transformations. Investors are increasingly interested in expanding the residential portfolio and are therefore increasingly considering care and student housing.

Strongest first half-year ever on the Dutch residential investment market
After the good start of 2018, it looks as if the record amount of more than 5 billion euros in residential investments in 2017 is set to be broken before too long. In the first half of 2018, a total value of 3.5 billion euros has been invested in rental dwellings. This has never before been the case in the first six months of any year. Not only foreign parties are making large transactions in housing – the market is characterised by a large Dutch interest in residential property. Approximately 75% of the volume was from Dutch buyers, with the much-discussed Vesteda transaction forming an important part. Although this transaction involves a total volume of 1.5 billion euros, the seller NN immediately took a 1 billion share in the new owner's portfolio. The remaining 500 million-euro "brick and mortar deal" is still the largest in the figures, but the volume was further increased by five more transactions that exceeded 100 million euros. In light of this liquidity in the market, together with the number of transactions that are still expected this year, Capital Value forecasts that 2018 will be a new record year.

Building output remains limited; number of building permits declines
It is noteworthy that both in the investor market and in the retail owner-occupied market, building output is strongly lagging behind the demand for new dwellings. Despite the announcement by Bouwend Nederland (the Dutch Construction and Infrastructure Federation) in its Woonagenda (housing agenda) that building output would total 75,000 new dwellings, the number of permits issued amounted to only 15,000 in the first quarter, according to Statistics Netherlands. That is a decrease of 5.5% compared to the first quarter of last year and a decrease of as much as 8.6% compared to the last quarter of 2017. And only 4,000 permits were issued in April 2018, which indicates a further decline. If this rate continues, the target will not be achieved and approximately 60,000–65,000 permits will be issued. This may be due to the fact that municipalities simply cannot process the required long-term spatial planning procedures and applications more quickly. In addition, other restrictions are affecting building output, such as rising building costs and the capacity at construction companies.

According to Marijn Snijders, Managing Director of Capital Value, “Due to the disappointing number of building permits granted, the pressure on the existing stock will increase even further and there will, for now, be no end to the increase in purchase and rental prices on the housing market.” Capital Value previously stated that the housing shortage in 2018 will amount to more than 205,000 homes (–2.7% of the stock). To reduce the housing shortage to normal proportions (–1.75%) in five years’ time, the number of new dwellings will have to reach an average of 87,000 per year over the next five years. “There has never been so much capital available for investment in rented dwellings, which offers opportunities to reduce shortages. Collaboration between market parties, housing associations and local authorities is essential to increase building output.”
 

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