International pension funds want to invest more than EUR 12 billion in Dutch residential market by 2021
27 november 2018
In 2021, possibly 100,000 Dutch dwellings will be owned by international pension funds. International investors have an unprecedented interest in the Dutch residential market. In 2018, they invested a record amount of EUR 2 billion, double that of the previous year. International parties have never invested so much in Dutch rental dwellings. The number of international investors that are investing or want to invest is only increasing: at the beginning of 2018, 25 international investors had Dutch rental properties in their portfolios. During 2018, seven new international parties entered the Dutch residential investment market. The value of the Dutch rental dwellings in their portfolios now exceeds EUR 7 billion. This concerns an estimated 45,000 dwellings. This is evidenced by recent research conducted by Capital Value among international investors, which was presented in Hong Kong today during the MIPIM Asia.
85% are investing longer term
International investors are increasingly investing on behalf of pension funds. Of the International investors currently operating in the Netherlands, 85% are investing on behalf of pension funds. They have a long-term strategy to invest with a buy and hold strategy for Dutch dwellings. 75% of the investors surveyed indicate that they wish to invest in dwellings for at least five years, with 25% for a period of 10 years or longer. Unlike in previous studies, there is less emphasis on private equity capital. This is confirmed in part by the departure of two international private equity parties who have sold their Dutch residential portfolios in recent years.
Pension fund money primarily originates from Germany, the United States and Asia
The study shows that much of the available capital will be provided by pension funds from Germany, the United States and Asia over the next three years. This is in line with investments in the past year. Of the EUR 2 billion invested in 2018, approximately 39% came from the United States, 24% from Germany and 14% from Asia. It is striking that in the past two years, interest from Asia in particular has shown strong growth. This is mainly through investors from Japan, Korea and Singapore.
The Netherlands sparks interest
Remarkably, the Netherlands can count on the most interest among the surveyed investors, followed by Germany and Belgium. 54% of the funds surveyed indicate that interest in the Netherlands has continued to grow over the past year. In contrast, the UK is much less popular than in previous years. In previous studies by Capital Value in recent years, the UK and Germany stood at the top. The UK decline is in part due to (the impending) Brexit and the uncertainty this will create for investors.
The main reasons for investing in Dutch rental dwellings are the positive economic climate, demographic growth, stable returns and high demand for dwellings. The Randstad is still the most favoured area for international investors in which to invest in dwellings. 54% of residential investment volume is invested in this region. In addition, 32% is invested in portfolios in which dwellings are located both in the Randstad and elsewhere. In 2018, approximately 14% of the EUR 2 billion was invested outside the Randstad.
EUR 12 billion available for the next three years
The surveyed investors indicate that they will have unprecedented capital of more than EUR 12 billion available to purchase Dutch rental dwellings over the next three years. If this amount can actually be invested, this would result in the acquisition of approximately 50,000 existing and/or new-build dwellings. International pension funds have invested little in new-build dwellings until now. However, a majority of international investors indicate considerable interest in newly built projects or dwellings yet to be developed. This interest is not limited to the private rental housing sector: there is also a great deal of interest in social rental housing, student housing and homes for the elderly. This is a positive signal for the huge current construction challenge.
According to Marijn Snijders, Managing Director of Capital Value: "The record amount of available international capital can be of huge importance for reducing shortages. International investors are mostly complementary to Dutch pension funds and housing associations. They are also interested in older property. By purchasing this from Dutch investors and housing associations, these parties can once again invest in rejuvenating the portfolio and make it more sustainable. In addition, international investors' new-build output can play a role in the provision of student accommodation, starter homes and senior homes, as they have extensive experience in these sectors."
Extra efforts needed to create sufficient supply
Capital alone is not enough to satisfy the housing market. To create sufficient supply during the years ahead, additional efforts are needed from market players, construction companies and municipalities to raise production. Marijn Snijders: "A positive consequence of the increase in international interest is that international investors are also involving international banks in transactions on the Dutch housing market, which creates more financing space. It is essential to leverage this momentum. With insufficient supply, international investors may lose interest in the Dutch market and invest their money in other countries."