Average rental yields on apartments relative to sales prices have now reached the lowest levels in 40 years, pan-European real estate investment manager Catella’s latest European residential market tracker research shows.
Thomas Beyerle, Head of Research at Catella, explains:
“Such a pronounced spread between rental yields and rising sales prices has not been witnessed in Europe since the high asset inflation of the late 1970s. Major monetary, economic and demographic megatrends are converging very quickly on housing markets — the largest asset class of all.
“Accelerating urbanisation flows and the increasing unaffordability of buying properties in large urban centres, are providing the demand sponge soaking up the supply of rental housing from private and institutional investors alike. From Norway to Spain and from France to Poland, we are also seeing residential developments being built to the same standards with comparable investment characteristics, really creating a fungible pan-European residential market for investors that has never been seen before.”
Germany and the Netherlands, the two countries where the media and politicians have been most outspoken in their criticism of the ECB’s ultra-low interest rate policies, are also the two markets where the investment flood into rental properties has been the highest. Residential investment transactions in the 59 major European cities, within 19 countries, covered by the Catella research, totalled €22.7 billion in the first half of 2019, of which Germany accounted for 30% and the Netherlands 21%.
European private investors account for roughly 85% of the capital flows into residential property investments, but they are increasingly being followed by institutional investors. Residential investment transactions overtook the value of retail property investments in Europe for the first time in the second-half of 2018, as competition from e-commerce has battered bricks and mortar stores and investment returns.