Investors seek new price equilibrium in Dutch market
Transaction activity has come to a virtual standstill in the Dutch real estate market as investors seek a new price equilibrium following the rapid hike in interest rates since mid-2022. The yield shift in the Netherlands during that period may have been greater and quicker than anywhere else in Europe, but investments here remain quite expensive due to high transfer costs and the potential impact of new regulations, explained Laurien van Wieringen, Director Investment and Asset Management at M&G Real Estate, during an investment briefing on the Dutch market held recently at the Amsterdam office of law firm CMS.
“There is a lot of uncertainty about pricing given the potential of downward valuations in the next three to six months. I don’t think the market will come back before the end of the year or early 2024,” she said.
Rogier Bos, Head of Real Estate Finance Benelux at German financier Berlin Hyp, is mainly seeing refinancing requests and believes transaction activity may not recover until the second quarter of next year. “The market is still very quiet. I know of one investor who decided to extend his summer holiday by another six months because there’s so little activity. A few investors are trying to do things, for example residential investments, and there are some bargains in the market. Basically, what I’m seeing all around me, and what’s keeping our office busy these days, is clients who are trying to create business in a relatively silent market.”
Many investors are still adjusting to this new era of higher interest rates and some even have an ‘unrealistic’ expectation that they will drop, he added. “In the past 18 months, we’ve seen a reset of the market, but not everyone is used to the new situation yet. It also takes time for the effects of higher interest rates to work through in inflation.”
Peter Helfrich, Managing Partner at Primevest Capital Partners, also cited a need for recalibration of current property values given that cashflows need to be priced differently. Traditionally the regulated rental market offered an inflation hedge, with some potential upside as well, but now there is also uncertainty about whether rising consumer prices will be fully indexed in rental housing contracts in future, Helfrich said. “Institutional investors are interested in core products, but they also need security, and we don’t have that today. In the past you knew what to expect. Now there are a lot of questions on how to value cashflow and with so many different things coming together, investors are taking a wait-and-see approach. Still, if we do get clarity on the shape of new regulation, the opportunity will be there,” he predicted.
