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Dutch market more resilient in 2020, slower to recover in 2021

The Dutch market was more resilient than most in 2020 but does not have the “bounce-back” factor this year, delegates heard at Real Asset Media’s European Outlook 2021 – The Netherlands, which was held online recently.

“Dutch GDP felt less of a negative impact from the Covid-19 crisis than other EU countries, partly thanks to a strong and rapid response from the Government,” said Dennis Schoenmaker, associate director research and strategy, AEW (pictured left). “The forecast is that at the end of 2021 only Germany will be ahead of the Netherlands in Europe.”

There was no steep fall but that also means there will be no bounce back.

“The crisis was less severe but we expect the recovery to be slower because it starts from a higher level,” he said. “The slower vaccine rollout in the Netherlands is a negative factor and elections coming up create some uncertainty.”

Property proves its resilience

The real estate market, like the economy, proved its resilience last year. Volumes were significantly down on 2019 levels, which were very high, but with sharp differences between sectors.

“Offices were hit the worst, while residential and logistics were barely affected, because of the strong tailwinds for those sectors that are attracting many investors,” Schoenmaker said.

Yields also diverged substantially. “We saw a real bifurcation in 2020,” he said. “Shopping centre yields widened out in quite a dramatic way to over 6% from less than 5%, while logistics yields fell to 3.5% because of high investment volumes and resi yields also went lower for the same reason.”

However, the spreads are such that real estate is still an attractive investment.

“On an absolute level you could say that real estate is expensive because yields are low, but if compared to the equity market or fixed income then it becomes very attractive because the spreads are still at historic highs,” Schoenmaker said.

Netherlands attracts on risk-adjusted basis

AEW has looked at total returns expected in the next five years and the required rate of return to compensate investors in 100 different markets, and the research shows that the Netherlands stands out as one of the most attractive markets on a risk-adjusted basis.

“The expected rates of return are higher, certainly better than in most markets in Europe,” he said. “Logistics in Amsterdam and Utrecht are top of the list and offices in those two cities offer good value as well. Retail is struggling, although less than expected, and there is some repricing taking place in the market.”

See full presentation here.

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