Bouwinvest said the same drivers are fuelling the growth of niche real estate investment sectors such as student housing, healthcare and hotels, which are emerging as attractive alternatives for institutional investors targeting the market in the Netherlands as it appears to be nearing a cyclical peak.
Dick van Hal, CEO at Bouwinvest, explains:
“Initial yields and yield spreads are stabilising in this late stage of the cycle, and institutional investors, especially, are finding it increasingly difficult to generate the returns they need. The long-term forecast for both residential and offices is that demand will remain stable and that is underpinning investment into these sectors. A select number of investors are, however, looking at higher-yielding alternative niche property segments such as healthcare, student housing and senior living, where there are attractive growth opportunities. As these niches mature, they are becoming more professionalised.”
The Dutch economy has been one of the outperformers in Europe over the past few years and capital flows from international investors into the domestic real estate market accounted for more than half of total investment flows across all asset classes into the country over the past five years. After a record year in 2017, the real estate market in the Netherlands saw investment volumes drop slightly in 2018 to €20.7 billion, but historically this is still very high, and transaction levels were strong in all sectors.
Institutional investors are expected to continue to drive capital inflows into the Dutch real estate sector over the next three years unless interest rates rise significantly, which is unlikely in the near future.
The report signals a number of potential risks on the horizon, such as the slowing economy, but GDP growth is expected to stabilise around this year’s level of 1.4% out to 2022 and other macro-economic fundamentals remain robust. Bouwinvest therefore expects real estate will continue to attract investment in an ‘ageing’ market cycle.
Dick van Hal added:
“Our investment strategy for the Netherlands remains primarily focused on affordable housing in the Holland Metropole, or Randstad, area in the west of the country and we are actively looking for plots for new development or redevelopment opportunities. For new residential product, we are also looking beyond the well-beaten investment paths in towns close to the large Dutch cities such as Zaanstad, Delft, Zoetermeer and Hoofddorp, where there is ample demand for housing and where it is possible to secure more attractive initial yields with new developments.”