The housing market must diversify and offer more choice in order to keep up with changing demand, experts agreed at Real Asset Media’s European Residential Investment briefing, which took place yesterday at MIPIM in Cannes.
“The main trend I see is diversification into different sub-sectors within the living sector, because people’s lives have changed and they want a more agile, more flexible way to live”, said Graham Place, CEO, Box Architects. “There needs to be a more varied offer in the same place. People of all ages must have more options and be able to upsize or downsize according to their needs without having to move to a different area or town”.
The residential sector has been very resilient during the pandemic, but in the post-Covid world it must tackle the new challenges that come from a fast-changing social and economic environment.
“The concept of living is the same because of the human-centric aspect of the product, but the variety is huge”, said Pavlos Gennimatas, Managing Director, European Living team, Hines. “There are different priorities for different demographics, but the trend is to improve the offer, add services and amenities and thereby improve people’s quality of life”.
Planning regulations and local rules vary, but the situation is similar in most European countries: the offer does not match the demand, in terms of quantity as well as quality.
“In Germany the supply side cannot meet the demand on size, rent, location and layout”, said Rainer Nonnengässer Executive Chairman, International Campus GmbH, Germany. “There is so much ‘60s stock that is the wrong quality and in the wrong place and needs extensive redevelopment”.
The social landscape has changed in Germany and the traditional family is no longer the norm: 50% of households are without children and in urban areas the percentage rises to 70%.
“There is strong demand for smaller units, not just from students but also from commuters, singles and professionals of all ages”, said Nonnengässer. “The next five to ten years will have to bring massive changes to the market”.
The Nordics are also experiencing similar social flux, as there is less demand for big units for traditional families and more need of smaller homes at lower rents.
“In Denmark rules are very restrictive, you could not build apartments less than 60 m2 in size, now it’s down to 40 m2 but people still have to share to afford the rent”, said Anne Sofie Vett Raaschou, Investments, Living, NREP. “You also can’t build high rises so that’s a problem. We want to work with the municipality and be part of the solution, but there are a lot of challenges”.
Some solutions are being found: last year the Danish Parliament approved the creation of Lynetteholm, an artificial island off the coast of Copenhagen that will house 35,000 people in new homes and also protect the city’s harbour from storm surges and rising sea levels.
But in most cases planning regulations do not facilitate much-needed change.
“In Poland planning rules are not flexible and it’s not easy to repurpose an office building into residential”, said Agata Jurek-Zbrojska, Partner Head of Real Estate and Construction, CMS. “But the legal environment must adapt because we are living in a period of constant change and traditional thinking must be banished”.