Recovery continues, demand set to rise further
The recovery seen in the residential real estate market in 2014 continued and firmed up in 2015, as house prices rose steadily throughout the year, especially in the Randstad, and approached pre-crisis levels. There are now some fears that the residential real estate market is overheating, especially in Amsterdam, where prices are still rising due to the absence of enough supply to meet owner-occupier demand. The number of transactions increased again last year, driven by domestic players and an increasing number of international investors looking to establish a foothold in the Dutch residential real estate market. We believe this interest will continue to drive up values in 2016 and beyond. The downside of this is that it will increase the competition for prime assets, especially in the inner city areas of the big cities.
Residential market looks bright
We are optimistic about the long-term prospects for the Dutch residential investment market due to a number of factors:
Continuing quantitative and a qualitative shortage of housing on the Dutch market, with shortage set to become even more acute despite the modest upturn in housing construction seen in 2015.
The ongoing urbanisation will increase demand for liberalised rental sector homes in what the Fund has identified as its core regions.
The effects of the measures taken by the Dutch government to create a level playing field in the housing market are already visible and the liberalised rental sector is now able to compete much more effectively with the regulated rental sector and the owner-occupier sector.
Tenants with above-median incomes currently renting in the regulated sector are now faced with higher, income-related rent increases, which is encouraging more people to switch to the liberalised rental sector.
Due to the lack of supply on the owner-occupier market, combined with the lack of readily available credit from banks, more and more people are choosing to rent in the liberalised rental sector.
Financially troubled housing corporations are now focusing on their core mission, to provide affordable housing in the regulated sector, which also has increased demand for homes in the mid-rental liberalised sector and increases the potential for above-inflation rate rent increases.
The residential rental market is now recognised as a mature and full-fledged alternative asset class and is attracting interest from domestic and foreign institutional investors.
The Fund is well positioned to take advantage of opportunities
We have a clear vision of what makes an interesting asset for the residential portfolio. Thanks to our comprehensive network of contacts with vendors, real estate developers, real estate agents and local government authorities, we are offered a constant and substantial flow of investment opportunities. This and our high-quality portfolio puts the Residential Fund in an excellent position to take advantage of the opportunities created by the current market conditions and trends. The Fund made some excellent acquisitions in 2015 and entered into commitments totalling € 466 million and we expect to acquire more high-quality homes in 2016 and 2017. We aim to sign agreements for up to € 600 million in the period through year-end 2018, taking our total assets under management to over € 4 billion. We have budgeted for disposals of around € 75 million in the same period. This is not a hard target and any decision to dispose of assets will be driven largely by the returns they generate.
Adding value through active asset management
In addition to targeted acquisitions, we will continue to optimise the standing portfolio through active asset management aimed at maintaining and increasing the value of our portfolio, including investments in the environmental and social sustainability of the homes in our portfolio. We will also continue to devote a great deal of attention to developing and maintaining close relationships with our tenants to maintain our high occupancy levels.
Amsterdam, the Netherlands, 14 March 2016
Bouwinvest Real Estate Investment Management B.V.
Dick van Hal, Chairman of the Board of Directors and Statutory Director
Arno van Geet, Managing Director Finance
Allard van Spaandonk, Managing Director Dutch Investments
Stephen Tross, Managing Director International Investments