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Risk management

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Market risk

Within the area of market risk, no material risks occurred in 2021.

Credit risk

Within the area of credit risk, no material risks occurred in 2021.

Liquidity risk

Within the area of liquidity risk, no material risks occurred in 2021.

Business risk

Business environment risk

Possible rental market regulation changes  

The cabinet is looking to maximise the ‘WOZ’ (Real Estate Value Act) value in the housing valuation system to 33%. This last measure is not yet in force. The WOZ value plays a significant role in the home valuation system in terms of points. If the WOZ value is higher, the home will be assigned a higher valuation in points. If the restriction were to apply, the impact on the portfolio is expected to be marginal.

Other potential plans include:

  • The regulation of rental levels on the basis of the housing valuation system.

  • The regulation of rental levels on the basis of a percentage of the ‘WOZ’ (Real Estate Value Act) value.

Following the reintroduction of a Minister of Housing and Spatial Planning, market parties are hoping that this will lead to a more effective and better aligned longer-term plan to solve the housing shortage. The new government has the following intentions. A goal to build around 100,000 new homes per year (with at least two-thirds of these in the affordable category). These will be built primarily in the 14 designated urban areas in the government’s NOVI programme. An annual sum of € 7.5 billion will be allocated to infrastructure around new housing developments. Furthermore, the landlord levy (‘verhuurdersheffing’) for social rental housing will be abolished. To slow down record house price increases, the transfer tax for investors will be increased to 9% from 8% as of 2023 and the € 100,000 tax-exempt gift (for house purchase purposes) will be abolished as of 2024. The measures come on top of initiatives at local government level, such as the halt on buy-to-let within the existing housing market.

FII regime

In 2021, the Dutch Ministry of Finance started the evaluation of the Fiscal Investment Institution (FII) regime that was announced in 2020. This evaluation should be finalised in 2022. Bouwinvest is taking into account the possibility that this evaluation will lead to a change of law as a result of which the Fund might no longer apply the FII regime. Bouwinvest has mitigated this risk by anticipating and preparing a restructuring of the Fund into the legal form of a so-called closed Fund for Mutual Account (FMA). Given its fiscal transparency, the closed FMA prevents double taxation for investors and is therefore the most appropriate alternative for an FII. Future amendments to the Dutch tax transparency rules, which are expected to be announced in 2022, should not alter this conclusion.   

In the course of 2022, Bouwinvest will decide whether to propose a restructuring of the Fund to the Shareholders’ Meeting and, if so, by which date such restructuring must be effected. Bouwinvest will take into account all uncertainties, including the future of the FII regime and the impact on all investors, when taking such a decision.

ESG risk

Last year was another year with exceptional weather conditions, and as such a reminder of the need to deal with climate change and related risks. In line with the recommendations from the Task Force on Climate Financial Disclosures (TCFD), the Fund recognises two main risks related to climate change:

  • Physical risks directly affecting the Fund's real estate and/or tenants (heat stress, pluvial flood, subsidence and coastal / river flood)

  • Transition risks, or risks related to the adaptation of the Fund's real estate to future climate changes (an environment in which greenhouse gases should be minimised to limit future temperature rises to 2˚C or less).

Core elements of the recommended disclosures include the organisation’s governance related to climate risks, the strategy, the risk management and resulting metrics and targets.

Within Bouwinvest, the Sustainability & Innovation department is dedicated to advising the Executive Board of Directors on preparing the management organisation and the Fund for the necessary steps and related changes. These climate risks affect a large number of risks within Bouwinvest's risk taxonomy, and Bouwinvest will adapt its risk taxonomy to incorporate climate risk where necessary. As an example of recent initiatives, the Fund has started a pilot for the next phase of identifying physical climate risks. The purpose of the pilot is to identify the net risk of all four physical climate risks based on both geographical location and building characteristics. The Fund is aiming to perform the same analysis for the total portfolio in 2022.

Operational risk

Within the area of operational risk, no material risks occurred in 2021.

Compliance risk

Within the area of compliance risk, no material risks occurred in 2021.

Early 2022, Bouwinvest was notified of a data breach from a software supplier that is used by Bouwinvest’s property managers. Bouwinvest has notified the appropriate authorities and informed its tenants about the data breach and possible consequences. The data breach was the result of a cyberattack. The software supplier is investigating the attack.