Residential occupier market
The Netherlands is faced with a substantial and growing shortage of homes, especially in the Holland Metropole region. This shortage, together with persistent low interest rates and favourable lending conditions, is fuelling the continuing rise in house prices. This is putting the owner-occupier market beyond the reach of a growing number of people, mainly first-time buyers and middle-income households. The mid-rental segment (with monthly rents between € 753 and € 1,013, price level 2021) is vital to the mobility in the housing market. High-quality mid-rental segment homes can prompt tenants living in homes that are too cheap for their income to move from social housing to the liberalised rental sector, which would free up homes for low-income households. This means investing in mid-rental segment homes can have a positive social impact.
Residential investor market
In recent years, annual real estate investment volumes have averaged between € 18 billion and € 20 billion. This continued in 2021 when, despite the Covid-19 crisis, the investment volume came in at € 18.2 billion. At the same time, initial yields have either contracted or remained stable and relatively low in almost all real estate segments. This indicates that investor interest in real estate has remained high.
Overall, in this persistent low interest environment, the yield spread of real estate compared to bonds still provides interesting investment opportunities. Bouwinvest therefore expects investor interest to remain substantial for growth sectors, specific opportunities and for core properties. Bouwinvest will closely monitor inflation and potential impact on interest rates.
Residential real estate has accounted for one of the biggest shares of Dutch real estate investment volumes since 2018. The demand for residential investments remained stable during the Covid-19 crisis, while the demand of investment opportunities declined. Investor interest in residential real estate is expected to remain strong in the coming years, driven by high demand on the occupier front.
The Russian invasion of Ukraine and rapidly escalating events in late February and in March 2022 are a significant tragedy for the people and is causing disruption to business and economic activity in the region and worldwide. This qualifies as a non-adjusting subsequent event. These events and the related market uncertainty could have an adverse impact on the Fund, including but not limited to the fair value of its investments and/or cash flows. At this moment it is not possible to provide an estimate of the financial impact of this crisis worldwide and on the Fund. The Fund screens periodically its existing business relationships, including sanction lists where required. In respect to Russia and Belarus no determination of direct breaches of any current sanction rules were noted nor any material matters that affect the going concern of the Fund. The Fund will continue to monitor market conditions as information becomes available and evaluate potential impact, if any, on the value of the Fund’s real estate investments and its operations going forward.
Residential Fund plan
The Residential Fund has a clearly defined strategy of controlled growth and optimisation based on the three pillars of quality, sustainability and affordability. The Fund firmly believes that the residential sector will continue to offer good long-term investment opportunities in core regions with strong economic and demographic fundamentals. The Fund's plan is to increase its invested capital to € 9,133 million by year-end 2024. The Fund will achieve this through positive revaluations, targeted acquisitions of high-quality assets, investments to keep its assets up-to-date and fit-for-purpose and the divestment of assets that no longer meet the Fund's strategic requirements. The optimisation of the Fund’s portfolio covers a whole range of aspects, from improving the overall quality of the assets, making them more sustainable, increasing the number of affordable homes, maintaining the high occupancy rate, improving tenant satisfaction and introducing innovations in the Fund's homes and in the services the Fund provides.
Bouwinvest believes that it can only generate long-term stable financial returns for its investors if it takes the societal impact into account in decisions it takes. The Fund’s focus is on the city of the future and it aims to create real value for life by investing for the long term in a responsible manner. The Fund wants to invest in thriving urban and suburban areas that are attractive now and will continue to be so in the future. Liveable cities are inclusive places, where people can live, work, recreate and spend their time. The Fund wants its portfolio to reflect that inclusiveness, which is why it is looking to increase the number of affordable, mid-rental segment homes in its portfolio. In addition, the Fund aims to reduce the environmental impact of its portfolio, striving for a net-zero carbon, nearly energy-neutral and climate-resilient Paris Proof portfolio before 2045.
The pandemic will leave its mark on the real estate markets. Many developments that had already been initiated before the pandemic accelerated during the crisis. At the same time, the Fund is convinced that once Covid-19 measures are lifted, people will want to travel and meet each other again. With its long-term investment scope, the Fund focuses on adding value for its investors, tenants and stakeholders by continuing to invest in attractive living and working environments.
Amsterdam, 21 March 2022
Bouwinvest Real Estate Investors B.V.
Dick van Hal, Chief Executive Officer and Statutory Director
Rianne Vedder, Chief Financial & Risk Officer and Statutory Director
Mark Siezen, Chief Client Officer
Allard van Spaandonk, Chief Investment Officer Dutch Investments
Stephen Tross, Chief Investment Officer International Investments