Netherlands Residential

MarketView
November 2014 CBRE Global Research and Consulting

INFLATION HOUSE PRICES SOLD UNITS INVESTMENT VOLUME PRIME YIELD (MULTI)
Q1-Q3: 1.0% Q3: 4.8% y-on-y Q1-Q3: 37.9% y-on-y Q1-Q3: 231.7% y-on-y Q3: -10 BPS q-on-q

GROWING CROSS-BORDER INVESTMENT ACTIVITY

Quick stats Figure 1: Key economic data

Movement since 14 Q1 13 Q3
Consumer confidence (LHS)
Rental prices
Favourable conditions for large purchases (LHS)
Initial yield Unemployment (RHS)

0 10%
-5 9%
-10 8%
Hot Topics -15 7%
-20 6%
 Continued recovery of owner-
-25 5%
occupier market
-30 4%
 Growing regional differentiation -35 3%
 Record high investment volumes -40 2%
-45 1%
 Strong foreign investment activity
-50 0%
 Institutional investors shifting to
Jul-12
Sep-12
Nov-12

Jul-13
Sep-13
Nov-13

Jul-14
Sep-14
Jan-12

May-12

Jan-13

May-13

Jan-14

May-14
Mar-12

Mar-13

Mar-14
the buy side

Source: Oxford Economics & Statistics Netherlands

Key Facts This shift towards consumption-led

growth already started during the
Supported by gradual economic second quarter of 2014. Household
recovery and a better sentiment, the consumption as component of
Dutch residential market has entered a economic growth was up by 0.4% on a
recovery phase. The Dutch economy q-on-q basis. Along with the increasing
grew by 0.2% on a q-on-q basis in the household consumption, retail sales
third quarter of 2014. Also, the rose as well. This was most notably the
unemployment rate is declining. case in the food segment of the
However, in recent months economic market, but also DIY spending
growth is surrounded by increased increased. Spending growth on other
uncertainty. Leading indicators, such as durable goods was still negative,
consumer confidence and the number though.
of temporary workers hired, are
pointing at weaker growth for the Based on these early signs of recovery
months ahead. activity in the residential market is
growing. Household-related internet
Despite this increased uncertainty, the searches are on the rise, as well as the
1 economic growth is expected to number of mortgage applications.
strengthen throughout 2015. Export as
a driver of growth is expected to be
substituted by consumer spending,
which is a sign of sustainability.
 Owner-occupier recovery
November 2014

Figure 2: Household growth 2014-2040

The owner-occupier residential market has seen increasing
activity and a modest growth in average price levels.
However, there is a large regional variety in the recovery.
The economic core regions in the west of the country are
reporting solid price increases, whereas in the peripheral
parts of the country price levels are still declining.

Moreover, the current upturn in price levels and transaction

Netherlands Residential | MarketView

volume is still a long way from pre-crisis levels. After six

years of decline, the owner-occupied market transaction
prices are still 19% below the peak in August 2008. In terms
of transaction volume current activity is about 34% below
the peak in December 2008.

Generally, price increases in the owner-occupied market

correlate positively to rental growth in the rental market.
However, the rental market in the Netherlands is still mostly
regulated with rents capped by the government. The non-
regulated rental market covers only 4% of the total housing
stock and is showing recovery dynamics largely in line with
the owner-occupier market.

Rental segmentation
Source: Statistics Netherlands
Average rental prices in the non-regulated segment of the
market have been increasing gradually throughout the first
three quarters of 2014. Also in this market, the geographical Figure 3: Sold OOC units
variance is substantial. According to broker Pararius, for
20
example, new renters pay on average € 16.56 per sq m per
month in the economic core province of North Holland and 18
€ 7.86 in the peripheral province of Drenthe. Within the 16
province of North Holland, Amsterdam clearly stands out in 14
terms of rental levels and rental growth. Here, average 12
rental levels are the highest in the Netherlands and are 10
Thousands

expected to remain high due to ongoing demand pressure, 8

particularly in the mid-segment where availability is scarce 6
and demand high. In the other three large cities, Rotterdam, 4
The Hague and Utrecht, rental levels are about at least € 5 2
lower than in Amsterdam. These numbers illustrate a clear 0
Dec-12

Aug-13

Dec-13

Aug-14
Oct-12

Oct-13

pattern of divergence in the non-regulated rental market,

Feb-13

Apr-13

Jun-13

Feb-14

Apr-14

Jun-14
where differences occur at city/regional level.

Investment market
Source: Land Registry
In the first three quarters of 2014 the investment volume in
residential property amounted to over € 1.8 billion,
representing a stunning y-o-y increase of 232% compared to Figure 4: Price index existing OOC dwellings
the first three quarters of 2013. Especially the second and
third quarter of the year showed record high investment
2010 = 100
volumes of respectively € 690 and € 870 million. Most of 90
the investment deals in 2014 concerned properties in 89
Amsterdam and nationwide portfolios. This is reflecting the
88
fact that investors are mostly targeting large portfolios and
87
are focusing on the core areas with economic and
demographic growth. 86
85
In the past few years, institutional investment managers have 84
been the most active parties on the sell side, as they actively 83
2
sought to clean up their portfolios. Now, they are gradually 82
returning to the buy side as they have acquired new capital
81
and mandates and have created room for new inflows in
Oct-12

Jul-13

Oct-13

Jul-14
Jan-13

Jan-14
Apr-13

Apr-14

their portfolios.

.
Source: Land Registry / Statistics Netherlands
 More strikingly, international investors have made a big

November 2014
Figure 5: Rental development
entrance in the Dutch market, mostly reflected by large-scale
% Nominal Inflation Real purchases of investors such as BNP Paribas REIM and Round
7 Hill Capital. The largest (foreign) transaction concerned the
6 purchase of a portfolio (5,500 units) from distressed housing
5
corporation Vestia by German investor Patrizia, for more than
half a billion euros. Although the transaction must still be
4
approved by the Minister, a price agreement has been reached.
3 With this transaction, the first step towards the sale of large

Netherlands Residential | MarketView

2 housing corporation portfolios is a fact. It is expected that
1 housing corporations will increasingly replace the institutional
0 investors on the sell side of the market.
-1 Following the growing interest and increasing investment

2014E
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
activity, net initial yields have recently sharpened to a level of
4.5% for multi-family housing and 4.3% for single-family
housing. It should be noted that yields move out quite rapidly
Source: Statistics Netherlands when the location is subprime and in the case of older and
partially sold multi-family complexes (‘Swiss cheese’).

Debt

The recent increase in investment deals has been fueled by

Figure 6: Unregulated market rents
favourable developments in the debt financing market for
14.0 residential investments. Availability of debt finance has been
13.5 steadily returning to the residential market since the last
13.0
quarters of 2013 with deep liquidity back since the last three
quarters of 2014. Interest is now coming from a broad group;
12.5
Pfandbrief lenders, international insurance companies and debt
€ / sq m / year

12.0
funds, but local lenders ABN AMRO and especially ING are
11.5 also more active again.
11.0
10.5 The international investor interest in housing corporation
10.0 portfolios has prompted many international lenders to spend
time in understanding the Dutch market, something they are
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3

now trying to deploy on other transactions as well. With that

background these lenders are slowly getting more comfortable
with Dutch market particulars such as shared ownership
(through a homeowners association), leasehold and rent
Source: Pararius regulation.

The availability and terms of financing are, however, strongly

influenced by the need for a higher overall loan volume as well
as the volume per complex, although granular high-quality
Figure 7: Investment volume
portfolios are also attracting attention. With the current low
x Mio base rates all-in interest costs for the better assets can easily
€ 1,000 come in below 2%. Lenders specifically look for professional
€ 900 sponsors and partners with an ability to manage residential
€ 800 portfolios.
€ 700
€ 600 Lending conditions on the owner-occupier side of the market
€ 500 have been influenced by two contrasting developments. Stricter
€ 400 fiscal regimes introduced in 2013 and tighter conditions set by
€ 300
€ 200
banks have made borrowing more expensive. However,
€ 100 persistently decreasing interest rates and increased competition
€0 on the lending side of the mortgage market have had a
downward effect on the borrowing costs. The downward
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3

pressure on interest rates has in fact outweighed the stricter

lending policy, resulting in lower overall financing costs for
3 homeowners. Due to this, the owner-occupier market is offering 3
increasing competition for the unregulated rental market.
Source: CBRE
November 2014

Figure 8: Purchasers 2014 Q1 – 2014 Q3 Figure 9: Vendors 2014 Q1 – 2014 Q3

2% 1%
6%
17%
26% Private Developer

Institutional, Institutional,
Netherlands Residential | MarketView

Investment Fund Investment Fund

Corporation 38% Corporation

Other Private / Other

39%
71%

Source: CBRE Source: CBRE

Table 1: Prime net initial yield

2013 Q4 2014 Q1 2014 Q2 2014 Q3

(%) (%) (%) (%)
Single-family 4.50 4.40 4.30 4.30
Multi-family 4.80 4.70 4.60 4.50

Table 2: Key investment transactions 2014 Q1 – 2014 Q3

Number of
Location Type Purchaser Vendor Status Price (mio €)
units

Netherlands Nationwide Mixed Patrizia Vestia Existing 578 5,500

Netherlands Nationwide Mixed Round Hill Capital CBRE DRES Existing 180 1,534

Netherlands Nationwide Mixed Quadrigo BPFD Existing 138 987

Bouwinvest Dutch Institutional Residential

Netherlands Nationwide Mixed Aventicum Capital Existing 100 723
Fund

Netherlands Nationwide Multi BNP Paribas REIM Amvest Existing 40.1 265

Bouwfonds European
The Hague Multi Stebru New 54 456
Residential Fund
Bouwinvest Dutch Institutional
Amsterdam Multi Dura Vermeer / NJ de Nijs New Est. 50 300
Residential Fund
Syntrus Achmea Value Added
The Hague Multi Provast New 40 149
Residential Partnership
Bouwinvest Dutch Institutional
The Hague Multi Pinnacle New Est. 30 154
Residential Fund
4 Bouwfonds European Student
Amsterdam Student Foolen & Reijs Vastgoed (City Pads) New 25.7 354
Housing Fund
 OUTLOOK
Market recovery has set in, but it is very uneven and focused
on the major cities in the west of the country, particularly
(Greater) Amsterdam and Utrecht. Due to this development
there is a growing differentiation in the Dutch market. This is
resulting in well-performing regions with increasing house
prices and a strong demand pressure on the one hand and
less-performing peripheral regions where recovery is lagging
on the other. On the long term, this differentiation is likely to
strengthen as projections of population and household
growth in the various regions differ strongly.
Pressure on the Dutch government and the housing
corporations to limit access to social housing to those that
really need it, i.e. the lowest income groups, has resulted in
new regulation. Since 2013 the government has agreed on
a housing covenant, implementing additional income-based
rent increases in order to stimulate higher income groups to
move up and out of regulated rental units. This will put more
pressure on unregulated rental housing, especially the mid-
segment, where there is a tight supply of available units.
Recently, the government made a proposal to determine that
the maximum allowed rent in the regulated sector should not
only be based on the housing valuation system, known as
the ‘points system’ or WWS, but also adding the tax value
(“WOZ-waarde”) as a factor. By doing this, rents will be
higher in desirable areas, which should further facilitate the
movement towards the unregulated, commercial rental
market.
It should be noted that pressure on the unregulated rental
segment is partially relieved by an increased affordability of
mortgage loans, which might divert some of the outflow of
the social housing sector to the owner-occupier market.
5 5
November 2014
In another response to tight market conditions, new
(re)developments and transformations have started to pick
up, also targeting the mid-segment of unregulated rental
housing. This is particularly the case in Amsterdam, but also
Netherlands Residential | MarketView
in The Hague. In the capital, a considerable number of eye-
catching new development schemes have started or are
being marketed. They are often located at work/leisure
locations near the inner city, underlining the increasing
interdependence of working, leisure, shopping and living.
A growing pipeline together with the prospects of a
prolonged shortage of rental housing provide opportunities
for investors, as the commercial rental segment in the
Netherlands is still rather small. Besides, rents have
increased by 4.7% on average in 2013 and 4.4% in 2014,
largely thanks to the impact of government regulation. For
the years to come, these rent increases are expected to
remain on elevated levels, exceeding inflation substantially.
The interest from investors in the Dutch housing market has
increased strongly since the second half of 2013 and is
expected to continue in the years to come. Foreign investors
have prominently entered the market in 2014, which was
previously dominated exclusively by a group of Dutch
institutional investment managers and a group of large
private property companies and family offices. They are
accompanied by more liquidity on the debt market, a result
of the entrance of new providers. The sell side of the market,
on the other hand, will increasingly be fed by the disposal of
portfolios of housing corporations.
 CONTACT
November 2014

For more information regarding the Dutch Residential Market, please contact:

CBRE Research and Consulting

Netherlands Residential | MarketView

Machiel Wolters Joep van Vliet Nick van Wijk

Director Senior Consultant Consultant
Research and Consulting Research and Consulting Research and Consulting
CBRE B.V. CBRE B.V. CBRE B.V.
Gustav Mahlerlaan 405 Gustav Mahlerlaan 405 Gustav Mahlerlaan 405
1082 MK Amsterdam 1082 MK Amsterdam 1082 MK Amsterdam
t: 020 626 2691 t: 020 626 2691 t: 020 626 2691
e: machiel.wolters@cbre.com e: joep.vanvliet@cbre.com e: nick.vanwijk@cbre.com

CBRE Capital Markets CBRE Valuation Advisory

Alexander Buijs Pieter Broumels
Associate Director Director
Capital Markets Valuation Advisory
CBRE B.V. CBRE B.V.
Gustav Mahlerlaan 405 Gustav Mahlerlaan 405
1082 MK Amsterdam 1082 MK Amsterdam
t: 020 626 2691 t: 020 626 2691
e: alexander.buijs@cbre.com e: pieter.broumels@cbre.com

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This report is prepared by the Research and Consulting team at CBRE Netherlands, part of CBRE Global Research and
Consulting - a network of leading market researchers and consultants who work closely together to deliver real estate
market research, forecasting and strategic advice to investors, financiers and end-users worldwide.

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