Real estate is considered the most important sector of the economy. It is the collateral for most part of all funds worldwide.
In fits and starts the rising prices of real estate made possible an expansion of credit, but which eventually led to a veritable explosion of credit many negative side effects.
In 2006, a historic turning point occurred in the property sector, with falling prices since the collateral of the credit market under pressure.
The resulting credit crunch has temporarily put an end to the already 60-year debt cycle. ( see blog article of 05/11/19 )
The expectations of property price movements, given the importance of credit and related economic growth, not only important for investors and buyers for their own use.
The government and banks have their policies and strategic location depend on it.
Ultimately, the prosperity of everyone directly or indirectly influenced by!
Until the crisis the property had the wind quite in the back:
1. Favorable economic environment
2. Favorable financing conditions
3. Attractive interest rates
4. Large gains in real estate
5. Fairly strong rental market
After the crisis The situation changed adversely:
1. Emergencies aside, must be reckoned with low economic growth over the next 5 years
2. The role of government will not support the cutback trend (perhaps even hostile: think of the discussion on the mortgage)
3. The movement of the average consumer is limited by its high debt
4. From a historical perspective, interest rates will remain low, but the financial terms are tightened, for example:
* stricter selection by banks
* higher advances
* periodic review of the value of the collateral (whether or not additional payments?)
5. The trend indicates earlier than depreciation in value of the property
6. The rental market is under pressure
1. Office
The cold statistics tell a large part of the story: a total stock of 48 million m2 of office space is 14% empty. In a normal frictional vacancy rate of around 4% there is a huge oversupply of 10% or 4.8 million m2. ABN / AMRO expects that it oversupply In 2015 another doubled will be.
Why the high vacancy rate? There are many reasons for this:
1. economic growth remains below expectations
2. reduces the aging workforce
3. The “new works” (flex points, ZZP, s, combination home / office) reduces the need for office space
4. the “upward” move allows less competitive buildings behind
5. communities feel the need to stimulate new construction, especially in terms of employment
6. NVB (association for developers and building contractors) perform an effective lobby for its members, with the main argument of qualitative scarcity
This tremendous oversupply, the office rents declined on average over the last 10 years and are now (nominally) at the level of the early 90s. Also the constant value increases has ended.
From various sides is therefore a overall building freeze calling and called for conversion of vacant buildings into elderly housing, youth housing, temporary housing and commercial space.
A crucial point here would be a more dominant role for the government!
Conversion rather than new construction places no unnecessary pressure on space and materials, but is often hampered by partial vacancy. Over 60% of the vacancy is partly because in buildings in use.
The building freeze cuts in particular wood because of two very strong underlying trends: the “new work” and aging. Both trends in the coming years will only increase in strength.
2. Retail
The figures for the retail market are less depressing than those for the office.
The total retail space in the Netherlands is more than 28 million m2, with a vacancy rate of 6%. Here, at 800,000 m2 per year, however, and here too a number of negative trends in the market under pressure:
1. aging provides an overall decline in purchasing power as 65 and over 20% spend less
2. Internet shopping eaten more and more revenue from the shops
3. The weak growth in consumer spending slows down
Most vacancy is located under the peripheral concentrations and community centers. The main shopping areas and inner cities continue to be well up, as long as sufficient attention is paid to accessibility, security, offering complete and cozy decor.
Nevertheless, here too the underlying trend is negative and the new plans seem optimistic, and restraint needed.
Retailers in good locations, which are also ample attention to their web presence need not fear for the future.
3. Commercial Market
The statistics of this market resembles that of the office. The vacancy of the total stock of more than 16 million m2 and 13% despite the improving global economy is still growing.
Much of this offer is in poor locations and consists of old buildings. That kind of structural vacancy is not easy to solve.
Also here is the reluctance of government allocation of land required to be greater to avoid oversupply.
Much will depend on the logistics sector in the Netherlands.
As long as a distribution Netherlands still gaining importance, negative factors such as more efficient inventory management and “move up”, be compensated.
4. Housing
Rabobank gives three reasons for the expected 2% decline in the housing market in 2011:
1. The new funding rates are lower
2. The repayment terms are tightened
3. mortgage rates will rise
After the house prices in 2008 reached their peak, they fell by 7% and so does the number of transactions dropped sharply. If one can believe Rabobank, this trend continues.
How long this trend will continue depends on the development of world economy and whether the political advice of the IMF, the mortgage interest reduction, will take to heart. The IMF expresses concern because the high indebtedness of the Dutch homeowner, including created by the generous interest deductibility.
So much is clear, from a potential downturn in the economy, the politicians will surely fail again even throw salt in the wounds by partial elimination of the mortgage.
The net yield of the entire property sector in 2010 was 4.6%. Of all retail sectors scored the highest with 7.8%, the office market accounted for 3.5% and the market for industrial and residential dangling down by only 2.9%.
Given the negative trends, it seems unlikely that the returns in the near future will improve. This “yield compression” forces investors to focus and take into account the new reality.
More attention will be given to cost, but in good locations and durability of the buildings.
In cooperation with municipalities provides conversion of vacant buildings have reasonable chances of returns. Think Addressing the latest trend in which older people move away from the “green sites” and choose a safe urban environment. Remember that the number of people over 65 in the next 20 years from 9% to 25% of the population will grow!
For those more internationally oriented, there are probably better opportunities. The famous economist N. Roubini sees the glass as half empty developed countries, but instead of emerging as half full. As an example he cites of Rio de Janeiro, with dot risen to fourth most expensive cities in the world. Last year the property prices there by 47%!