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Residential Investment Attractiveness Index

Never has the investment volume in housing been as high as it is now. This year is no exception, and in the first two quarters a record amount of nearly 3 billion euros was invested. It is expected that the record year 2016 will be far surpassed. There are two important reasons why the investment volume is rising to record highs: the ECB policy and growth in investment opportunities in the market.

The ECB has been maintaining a low interest rate policy for years. As a result, the difference between the return on bonds and the highest return on housing is at least 2.8%. This means that investors are increasingly turning towards housing as an investment instead of bonds. This does not only apply to Dutch investors; foreign investors are also increasingly finding the Netherlands to be an interesting investment market.

More construction leads to more investment opportunities
Municipalities have in recent years steered towards a larger proportion of free rental segment houses in new construction. In 2017 alone, this led to a 50% increase in granted permits. This development is continuing in 2018 and there is a clear break in the trend compared to the prior, smaller free rental segment. The reason for this is the growing demand from consumers who are increasingly opting for this type of house. This is among other things due to changes regarding mortgage interest relief. This growing housing production offers investment opportunities for investors. They find this segment attractive because of the limited risk thanks to consistent rental income and a potential rise in rental prices.

The search for returns forces investors out of big cities
Investors are willing to pay a high price to acquire this popular investment product. The falling gross initial yields which were a result of this have been visible for some time in the large cities in the Randstad. It is expected that the initial yields will continue to fall throughout the entire country in 2019, with a 3% outlier in Amsterdam. Investors are continuing to expand their search area to achieve higher yields. The share of housing investments outside of the four large cities (G4) increased from 58% to 69% in the last three years. The top gross initial yield is now below 5% in the majority of the twenty largest cities (G20).