Recovery continues, demand set to rise further
The recovery seen in the residential real estate market seen in the previous two years continued in 2016, as house prices rose throughout the year, especially in the Randstad, and edged above pre-crisis levels. There are now some fears that the residential real estate market is overheating, especially in Amsterdam, where prices are still rising sharply due to the lack of sufficient supply to meet owner-occupier demand. In an unprecedented move towards the end of 2016, real estate agents were advising buyers to look outside Amsterdam as homes were selling well above asking prices as people rushed to buy in this ever more crowded market. On the investment market, the number of transactions increased again last year, driven by domestic players and an increasing number of international investors looking to establish a foothold in the Dutch residential real estate market . We believe this interest will continue to drive up values in 2017 and beyond. The downside of this is that competition is fierce for prime assets, especially in the inner city areas of the big cities. As a result, private and institutional investors are now turning their sights on sub-prime locations.
Residential market looks bright
We are optimistic about the long-term prospects for the Dutch residential investment market due to a number of factors:
Continuing quantitative and a qualitative shortage of housing on the Dutch market, with shortage set to become even more acute despite the modest upturn in housing construction seen in 2016.
Ongoing urbanisation will increase demand for liberalised rental sector homes in the Fund’s core regions, especially in the Randstad and Brabantstad urban conurbations.
There is a growing awareness under the (local) goverments for the mid-rental liberalised segment. This more and more results in programming in favor of this specific segment.
Tenants with above-median incomes currently renting in the regulated sector are now faced with higher, income-related rent increases, which is encouraging more people to switch to the liberalised rental sector.
Due to the lack of supply on the owner-occupier market, combined with sharp house price increases in the most popular locations, more and more people are choosing to rent in the liberalised rental sector.
The residential rental market is a mature and full-fledged alternative asset class and is attracting increasing interest from domestic and foreign institutional investors.
The Fund is well positioned to take advantage of opportunities
We have a clear vision of what makes an interesting asset for the residential portfolio. Thanks to our comprehensive network of contacts with vendors, real estate developers, real estate agents and local government authorities, we are offered a constant and substantial flow of investment opportunities. This and our high-quality portfolio puts the Residential Fund in an excellent position to take advantage of the opportunities created by the current market conditions and trends. The Fund made some excellent acquisitions in 2016 and entered into commitments totalling € 255 million and we expect to acquire more high-quality homes in 2017 and 2018. We aim to sign agreements for up to € 400 million in the period through year-end 2019, taking our total assets under management to over € 4.9 billion. We have budgeted for disposals of around € 225 million in the same period. This is not a hard target and any decision to dispose of assets will be driven largely by the returns they generate.
Adding value through active asset management
In addition to targeted acquisitions, we will continue to optimise the standing portfolio through active asset management aimed at maintaining and increasing the value of our portfolio, including investments in the environmental and social sustainability of the homes in our portfolio. We will also continue to devote a great deal of attention to developing and maintaining close relationships with our tenants and our property managers to maintain our very high occupancy levels.
Amsterdam, 20 March 2017
Bouwinvest Real Estate Investment Management B.V.
Dick van Hal, Chairman of the Board of Directors and Statutory Director
Arno van Geet, Managing Director Finance
Allard van Spaandonk, Managing Director Dutch Investments
Stephen Tross, Managing Director International Investments