Addressing ‘affordability’ could reward institutional investors

With urbanisation increasing and likely to mean that 70% of the global population lives in cities by 2050, there will be ever stronger demand for housing. However, social divides are likely to increase placing “affordability” high on the agendas of governments and municipalities.

But there is a role too for institutional capital.

“From an institutional investor perspective there’s a lot of capital available, the residential market is really attractive to invest in and we see the investment volumes going up,” said Hilke Nijmeijer, portfolio manager, CBRE European Residential Impact Fund, CBRE Global Investors.

“So we are really responsible for leading that available capital into the affordable housing sector where it’s actually needed,” she added.

CBRE GI has built a city scoring model that ranks the Europe’s 150 largest cities and looks at market dominance, growth and affordability. “In the top 20 cities affordability is becoming more and more an issue and that’s where we really can make a difference,” she said.

Although municipalities and governments have reacted differently – some, like Berlin, introducing rent controls – “affordability” is a common theme in all major cities, Niejmeijer told Real Asset Insight’s Richard Betts.

“Affordability” is particularly acute among middle income groups. However, the problem is also an opportunity for institutional capital because investing in affordable housing, especially for the middle-income bracket, produces stable long term cash flows in a sector where there tends to be 98% occupation.

Click on the video above to watch the full interview or listen to the podcast below.