Residential transaction volume falls by 61 percent to €1.5 billion
6 juli 2023
The transaction volume in the Dutch residential investment market amounted to €1.51 billion in the first six months of 2023. This represents a drop of 61% compared to the first six months of 2022. Of this total, €977 million was invested in new-build output, which amounts to a mere 4,300 new rental homes. This decline is partly due to the interest rate increase and the risen costs of construction, as a result of which many projects are no longer financially viable. Furthermore, the many proposed bills (including Affordable Rent Act, Real Estate Share Deal Transaction Bill and the announced limitation of interest relief) have negative financial consequences, which is bad news for the building output of rental homes and the efforts to reduce the housing shortage. A rapid introduction of the so-called 'Startbouwimpuls' (Construction Start Boost) could help with the realisation of construction plans that are currently not financially feasible.
Housing associations the most active parties in residential investment market
The transaction volume of €1.51 billion in the first six months was largely realised by housing associations, who were responsible for 48% of the total transaction volume. This represents a major increase in the influence of housing associations in the overall market, as this figure in 2022 was circa 23%. In addition to housing associations, institutional investors were also active participants, but less so than in previous years: the share of this investor type currently stands at approximately 24%. In the second quarter, the residential investment market was also marked by a number of portfolio transactions by major private investors, who will sell off these homes in individual units in the future.
Investments by international investors remarkably low
A remarkable development is the low proportion of investments by international investors. In the first six months, investments by international investors constituted just 6% of the total, compared to 27% in the same period of the previous year. Thijs Konijnendijk, Head of Research at Capital Value: "International investors are currently hampered by the high capital market interest rate, and possibly also by the intended introduction of transfer tax on property shares and the limitation of interest relief. The withdrawal of these investors is regrettable for the Dutch housing market, as they invest a great deal in large new-build projects which are often beyond the capacity of Dutch investors."
Merely 4,300 new rental homes in first six months
Investments in new-build output in the first half of 2023 will enable the construction of approximately 4,300 new rental homes (€977 million): only half the number of new homes invested in over the first six months of the previous year. This decline is partly due to the interest rate increase and the risen costs of construction, as a result of which many projects are no longer financially viable. Furthermore, the many proposed bills (including Affordable Rent Act, Real Estate Share Deal Transaction Bill and the limitation of interest relief) have negative financial consequences.
Most of the investments in new rental homes are currently made by housing associations (50%) and institutional investors (37%). This means that these homes consist primarily of affordable rental homes. The number of homes being added to the housing stock is far from sufficient to solve the housing shortage, which now amounts to more than 315,000 homes. Concerns around the building output of rental homes are further exacerbated by the low number of planning permissions issued in the first four months of 2023, at 21% less than in 2022. Capital Value previously already calculated that the housing shortage will rise further to 400,000 homes if incentive measures are not taken.
Investments in senior citizens' accommodation down 80%
An earlier analysis by Capital Value showed that investments in the sector that may well face the biggest challenge in the future – the healthcare property market – amounted to a mere €113 million in the first six months of 2023. This is also a worrying development, as some 290,000 additional homes for senior citizens need to be built by 2030.
Construction Start Boost must be introduced as soon as possible, as sufficient plans are in place
The introduction of the Construction Start Boost would represent an important stimulus for the construction sector and investors, enabling the start of construction on new-build projects that currently fall just short of financial viability. It is important that this boost be granted as soon as possible for projects with a planned construction start in 2023 and 2024. The good news is that there are enough plans in place to enable the start of construction on approximately 40,000 homes in the near future.
Marijn Snijders, managing director at Capital Value: "Dutch institutional investors and housing associations are still making efforts to realise more affordable rental homes. The numbers of homes being realised at present are too low, however. We wish to call for an even greater sense of urgency in the introduction of more incentive measures such as the Construction Start Boost. By acting now, we can prevent an increase of the housing shortage from being exacerbated by loss of capacity in the construction sector."