Dutch property recovery wins investors with 6%+ yields

Both residential and commercial property prices in the Netherlands are finally rising after seven years of declines, drawing international investors to the country for deals that can yield 6% or more, PIE’s Dutch Property Opportunities Breakfast with Robert Koot, head of research at Bouwinvest REIM.

“Prices are bottoming out. Residential was first, but you can see the same in offices and retail,” said Robert Koot, head of research at Bouwinvest REIM. Residential prices declined gradually by around 20% from the start of the financial crisis, while office property prices fell in the last seven years by some 40%. However, in both cases improvements are coming through. House prices have risen by 2-3% over the past six months, pointing to a gradual recovery over many years as opposed to a quick rebound, Koot said.

The Dutch government, financial institutions and individuals have been reducing their debts, and the economy has responded with economic growth of around 1% in 2014. That figure is expected to expand to 1.5% in 2015 as recovery takes hold. “We have seen not only stability but also growth. Unemployment is declining again and you see consumer and business confidence coming back,” said Peter Helfrich, managing director at Patrizia Netherlands. German property group Patrizia is one of a handful of large foreign investors to turn its attention to Netherlands’ housing. Last year it bought a portfolio of 5,500 rental homes from housing association Vestia for € 578m, in a deal that stemmed from government efforts to deregulate the large social housing sector. “We see huge opportunities in the Netherlands,” Helfrich added.

Unleveraged returns are appealing and can range between 6% and 6.5% for residential, and up to 7.5% for retail and residential assets, the panel said. “It’s indeed the place to be,” agreed Rogier Bos, head of real estate finance Benelux at Berlin Hyp. “We tend to think that all residential portfolios can work out as long as take into account increasing interest rates in the future,” he added. The German lender has € 1bn of loans spread across property sectors in the Netherlands and wants to increase its focus on the country. “The Dutch part of our assets will only grow,” Bos said.

With conditions improving, many other investors are poised to enter the Netherlands. “There is increasing interest from foreign investors to get some exposure to Dutch real estate,” said Jaap van der Bijl from Syntrus Achmea Real Estate & Finance. However, the country is relatively small, assets can be hard to come by and caution is needed. Not every region in the country has reached bottom or is likely to rebound over time, van der Bijl argued, adding that outperformance is likely to be found in the largest cities, including Amsterdam, Rotterdam, The Hague and Utrecht, as well as the broader so-called G32 group of cities. “There is a strong bifurcation in the market which applies to residential, retail and offices,” he said. “You have to be very selective.” pie

Source: Property Investor Europe (log in for the full article)