Savills Residential Market Autumn 2014

savills.
nl/research 01
House prices up
Over the past years houses have
become more affordable as house
prices decreased, mortgage rates
dropped, also due to Dutch pension
funds entering this market, and as the
temporary exemption gift tax, which
provides parents with the possibility to
pay off housing debts of their children,
proved helpful. NVM data shows that
the average price increased by 4.7%
yoy to 215,100 in August. The total
number of houses sold increased by
23.6%, from around 10,000 in August
2013 to over 12,300 in August 2014.
The drop in consumer condence in
August however, seems visible in the
housing market too, as the gures
August 2014 do remain well behind
those of the month before. The coming
months will show whether economic
uncertainties will expand, or whether
this is just a temporary setback.
Supply and demand
There are four major trends dening the
Brieng Note
Residential investment
volumes top 1.7 billion Autumn 2014
Savills World Research
Netherlands Residential
Economic growth
The Dutch economy grew by 1.1%
yoy in Q2 2014, mainly due to
increased exports and private sector
investments. Most noticeable key
gure concerned the stabilisation of
household consumption, after ve
years of consecutive decrease. This
stabilisation is linked with the overall
increase in consumer condence over
the past year, from -44 in February
2013 to -2 in July 2014, and is in
accordance to the improvement of
sold house prices.
In August and September however,
consumer condence, producers
condence and the Nevi Purchasing
Managers Index all decreased. This
signals that economic recovery
is still feeble and the geopolitical
instabilities in Eastern Europe and the
Middle-East are cause for uncertainty
within Europe. Reason for the ECB
to support economic growth by
cutting its interest rate to 0.05% and
introducing new stimulus measures.
GRAPH 1
Residential investment volume Netherlands: Record
investments in H2 2014 and more to come
Graph source: Savills
future demographic landscape:
- the total number of households will
grow by around 900,000 households to
8.5 million in 2040;
- the vast majority of this growth
concerns single person households of
65 years and older;
- the increasing concentration of labour
and people towards the major cities
and the shrinkage in other areas;
- the overall ageing of the population,
resulting in an increasing demand for
neighbourhood amenities.
New residential developments should
take these trends into consideration
and thus focus on the housing of
smaller households, on the largest
cities and on dwellings and locations
suitable to the needs of elderly people.
At the supply side an increase in new
developments can be expected as
the number of building permits started
increasing this year. In H1 2014 a
total of 15,300 permits were issued, a
27.5% yoy increase. This is however
still a long way from the 37,400 new
permits issued in H1 2007 and far less
than needed to deal with the housing
needs of the growing population.
House prices and rent
levels
NVM data regarding Q2 2014 shows
that house prices in the Netherlands
increased on average by 3.5% yoy,
while in Amsterdam prices rose by
almost 10.0%. Also the average period
a residential unit is on the market
dropped substantally and stands at
just 58 days in Amsterdam, compared
to a national average of 135.
Data from Pararius shows that average
rents in the private sector remained
stable over the past year and stand
0%
1%
2%
3%
4%
5%
6%
0
200
400
600
800
1,000
1,200
09H1 09H2 10H1 10H2 11H1 11H2 12H1 12H2 13H1 13H2 14H1 14Q3
M
i
l
l
i
o
n

Investment volume Gross prime yields

Autumn 2014
savills.nl/research 02
Brieng Note | Residential market
at 12.42 per sqm per year, while for
Amsterdam rents increased by 5.6%
yoy towards a record high 19.31 per
sqm per year.
Rents within the social housing stock
rose by 4.4% yoy, as it is now possible
to increase the rent by ination plus
an income-related share. Remarkably,
the housing associations increased
their rents by 4.7%, while the rental
increase by private owners reached
3.8%. The steep increase in rents over
the past two years is partly a matter
of catching up, as in previous years
rental increases were capped at the
ination rate, and partly caused by the
landlord tax, mandatory for all owners
of regulated housing stock.
Minor changes in
regulations
Traditionally the government puts
forward their goals and budget at
Prince's Day, the third Tuesday in
September. While last year these
included substantial changes for the
housing market, this year the changes
were less substantial and most of them
were published earlier in the year. Two
elements need mentioning however.
First, the landlord tax will remain
in place in 2018 onwards and will
increase, although no percentages are
listed yet. Secondly, the maximum rent
level of social housing will be xed at
699.48 for the upcoming three years.
This will give private investors more
room for investing in the non-regulated
700+ market segment.
Investment volumes
surge
After some hesitation H1 2014 saw
a large inux of (foreign) capital into
Dutch residential portfolios. In the
months following the German-based
BNP Paribas REIM signing the rst
40m deal in April 2014, portfolio
purchases by Dutch Quadrigo (95m),
Aventicum (100m) and UK based
Round Hill Capital (180m) drove the
total investment volume up to 980m
in H1 2014, a 81% yoy increase.
In Q3 2014 German investor Patrizia
purchased* a 5,500 unit Vestia portfolio
for 577m, the largest transaction
so far, and the investment volume in
this quarter reached 730m already.
As a number of substantial portfolios
(among others Vestia, Lips, WIF) are
currently being marketed, this gure is
likely to reach well over 1bln. Already
Graph source: Savills
"Foreign investors need volume and are
aiming at 500m plus investments."
Jan de Quay, Netherlands Investments
Savills team
Please contact us for further information
Savills plc
Savills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company
that leads rather than follows, and now has over 600 ofces and associates throughout the Americas, Europe, Asia Pacic, Africa and the Middle East.
This report is for general informative purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus,
agreement or other document without prior consent. Whilst every effort has been made to ensure its accuracy, Savills accepts no liability whatsoever for any direct or consequential loss
arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research.
Clive Pritchard
Investments
+31 (0) 20 301 2000
[email protected]
Jan de Quay
Investments
+31 (0) 20 301 2000
[email protected]
Jeroen Jansen
Research
+31 (0) 20 301 2094
[email protected]
Rene Tim
Investments
+31 (0) 20 301 2000
[email protected]
the total 2014 gure is topping the
record high 1.3bln of 2013. It has to
be noted that the top 5 transactions
totaled 59.3% of the total volume.
International investors
in a highly regulated
residential market
International investor have come
to embrace the Dutch residential
property market as the fundamentals
are sound: limited supply, growing
demand, low vacancy, increased
room for rental increases and relatively
low but increasing selling prices. The
regulations, albeit strict, do provide
for certainty and any loose regulatory
ends are generally incorporated in the
buying price.
More than a dozen international
investors, not present yet, are eyeing
the Dutch residential market. These
investors are generally more interested
in larger lot sizes (over 500m) than in
smaller lots, as they need substance.
Outlook
Appetite from national and foreign
investors remains high and nancing
is readily available. Coupled with low
interest levels, potential vendors might
consider bringing their residential
property to the market shortly. Over
the past months gross initial yields
contracted by 10 bps to currently
5.15%. Savills expects yields to remain
stable for the remainder of the year.
* The Minister for Housing formally still has to approve.

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