Dutch real estate is extremely popular with investors. Over 9 billion euros was invested in real estate in the Netherlands in 2014, nearly double the amounts in 2013 and 2012 of 5 and 4 billion euros respectively. The boom is mainly attributable to foreign investors. And while they are not a novelty on the Dutch market, things have noticeably changed. Dutch real estate comes with attractive returns, and the outlook for the credit market is bright. ABN AMRO expects foreign investors to remain a strong presence in the Dutch market. These and other conclusions are gathered in ABN AMRO's report 'Foreign capital for Dutch real estate', which has been published today.
Dutch real estate market very attractive compared to other countries
The real estate market of the Netherlands suffered a series of heavy blows in the past few years. Between 2008 and 2013, property values declined by an average 3% annually. The years 2013 and 2014, however, saw investor demand explode, making the Netherlands the European country with the largest percentage of foreign investors – with Finland coming in a close second. This situation is a result of the Dutch combination of initial yield and risk premium. ABN AMRO confirms that in an international comparison, the Netherlands has the highest risk premium: 5% in 2013. In 2014 this figure even climbed to 5,7%. Add the initial yield of 6.6% (2014 figure) and the Netherlands proves to be a highly appealing investment market. But, ABN AMRO clarifies, the great enthusiasm of foreign investors does not mean the Dutch real estate landscape is dominated by them. After all, real estate does not change hands every five years. Additionally, certain segments, including small retail units, are still mainly owned by Dutch investors. And Dutch investors, in their turn, also invest relatively large sums in foreign property. A survey (1) among 17 Dutch pension funds revealed that 9.1% of their total assets are invested in real estate, and of these investments 82% are outside the Netherlands.
Opportunities for Dutch players
Foreign investors actually open up many opportunities for Dutch players, such as housing associations and established investors. We spoke with Erik Steinmaier, Head of Real Estate Advisory at ABN AMRO. "These investors bring in extra liquidity, especially in the non-prime office market. This allows established investors to withdraw their capital and reinvest it elsewhere. Besides, foreign investors add value to the existing real estate market by reducing vacancy levels and by renovating property. And last but not least, they are contributing to the transformation of the Dutch housing market by buying up homes from housing associations. Dialogue with foreign investors can result in opportunities for cooperation: Dutch players possess valuable knowledge which is vital to the foreign partners to operate successfully in this market. And foreign players, with to their considerable financial clout, can help Dutch partners realise their growth ambitions."
(1) European Institutional Real Estate Survey 2013