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Amsterdam
Residential
Market
AN INSIDER’S VIEW
contents | AMSTERDAM RESIDENTIAL MARKET
Contents
amsterdam residential market
introduction | amsterdam residential market
5
Amsterdam in a wider context | The metropolitan region Amsterdam
7
Demographics | Pressure on the inner ring city
9
Market structure | scarcity is growing rapidly
11
Market structure | REGULATORY REFORMS PRESENT LARGE CHANGES
12
Market structure | RESIDENTIAL DEVELOPMENTS and RESIDENTIAL leasehold
13
Residential projects in Amsterdam | A SELECTION OF RECENT & FUTURE DEVELOPMENTS
15
Finance Market | RESIDENTIAL FINANCE
17
Market Dynamics | RESIDENTIAL RENTS & INVESTMENTS
19
Outlook | FUTURE POTENTIAL OF AMSTERDAM
21
contact | CBRE RESIDENTIAL TEAM
22
3
introduction | AMSTERDAM RESIDENTIAL MARKET
introduction
amsterdam residential market
Hot Topics
Increasing popularity Amsterdam
Long-term population growth
Housing shortage increasing
Skewed distribution of stock
presents opportunities in favour
of unregulated housing
High demand creates upward
pressure on prices
Lack of residential developments
strengthens shortage
Opportunities for financing
4
At the moment, the Dutch residential market is
evolving rapidly. For decades, the market has
been a closed playing field, with large owneroccupier and social housing sectors. Governmental
policies were predominantly focussed on the
owner-occupier market and provided an active
stimulation of the ownership of dwellings, for
example by the mortgage-interest deductibility
scheme. On the other hand, the subsidising of the
strongly expanded social housing sector left little
room for commercial investors.
This has eventually led to an unsustainable and
undesirable market structure, which was exposed
by the economic crisis and has meanwhile
urged the government to impose a number of
regulatory changes. These reforms are effectively
repositioning and stimulating the market for
commercial and unregulated rental housing, for
which a growing demand and a growing shortage
can be seen. This development is creating
attractive investment opportunities for investors.
As the capital and largest city in the Netherlands,
Amsterdam is the main focus for economic
and employment growth and the city is seeing
a continuous influx of young, highly-educated
people. As a result, the demand for, and the
shortage of, unregulated housing is the highest
in the country. Meanwhile, a number of new
development schemes have been started to cater
for this demand. Opportunities for investors are
increasing rapidly, making the residential market
of Amsterdam the perfect subject for this report.
5
The metropolitan region Amsterdam | Amsterdam in a wider context
Amsterdam in a
wider contexT
The metropolitan region Amsterdam
Amsterdam 5th most important
region
The Amsterdam Metropolitan Area (MRA) is
considered the 5th most important economic
region in Europe (MRA, 2014). Consequently
Amsterdam is listed amongst the most attractive
cities for business activity in Europe. Almost 2,500
foreign companies are located in Amsterdam, of
which more than 460 international HQs. About
20% of Amsterdam’s population is employed by
an international employer (DRO, 2012). The second
largest internet hub, the AMS-IX is located in
Amsterdam and attracts many TMT-companies*
and employees.
About 17% of the Dutch GDP is
generated in the MRA
The MRA roughly covers the Midwestern part of
the Netherlands and includes 36 municipalities.
The region inhabits 2.4 million people and has
witnessed an above average economic growth
compared to the national average in 2013.
With a 100 billion euro economy in 2013 (GDP),
the region contributes about 17% to the national
total. A vast majority of GDP is generated by
Business Services (ca. 14.5%), Wholesale (ca. 11%)
and Financial Services (ca. 9.5%) in 2011. Also of
importance are Schiphol International Airport and
the Port of Amsterdam, which contribute largely
to the success of the region.
The major importance of the City
of Amsterdam
The importance of the City of Amsterdam is
strengthened by the fact that the city contributes
about 40% per year to the total GDP of the MRA.
The adjacent Schiphol Airport (Municipality of
Haarlemmermeer) further supports Amsterdam’s
business activities. The importance of Amsterdam
has created an appealing environment for young
highly educated talent (as can be seen in figure
2). The cultural environment, the high quality
liveability and the large pool of amenities are
all mentioned in the Economist paper on quality
of life in cities, where Amsterdam ranks 2nd
(The Economist, 2012).
Figuur 2
*TMT companies:
Technology,
Media and
Telecommunications
Figuur 1
MRA
City of Amsterdam
Paris
Vilnius
Sofia
Tallinn
Stockholm
Amsterdam
Copenhagen
Helsinki
Brussels
Nicosia
Luxembourg
London
Riga
Madrid
Budapest
Bratislava
Athens
Dublin
Berlin
Ljubljana
Warsaw
Lisbon
Vienna
Rome
0
Figure 1 Amsterdam in The Netherlands
6
10
20
30
40
50
60
Figure 2 Higher Educated per city - Source: Urban Audit
7
Pressure on the inner ring city | Demographics
Demographics
Pressure on the inner ring city
More than 100,000
new inhabitants
expected by 2040
Figuur3 3
Figuur
85e.o.
+
85
2030
2013
80-84
80-84
2030
More than 12.5% Growth in
Population by 2040
Growth of 12.4% in single person
households
The attractiveness of Amsterdam has already
created a scarcity of housing, especially within
the inner ring city (the area within the A10 ring
road). Forecasts indicate more than 12.5% growth
in population by 2040, increasing the current
population of about 800,000 to more than 900,000
inhabitants (Amsterdam Statistics Bureau).
The attractiveness of the city for young people is
strengthened by the fact that the age group 20-34
years represents the largest group in both 2013
and 2030. Another growing age group is the group
of elderly (65+).
As the population continues to grow, another
important change can be observed. Due to
changing lifestyles more single households are
expected, as young people tend to live together in
a later stage of life. Also, elderly will increasingly
represent a single household as the population
ages. It is expected that the number of single
households will increase by 12.4% in 2035, while
the number of cohabiting households will increase
only by 9.8% and the number of couples with
children and ‘other’ will increase by 10.3%, as is
visualised in figure 4.
2013
75-79
75-79
70-74
70-74
65-69
65-69
60-64
60-64
55-59
55-59
50-54
50-54
45-49
45-49
40-44
40-44
35-39
35-39
30-34
30-34
25-29
25-29
12.4%
9.8%
10.3%
28,540
18,731
45,982
20-24
20-24
15-19
15-19
10-14
10-14
5- 99
50- 44
0100000
100000
80000 50000
60000
40000 0 20000
0
20000 100000
40000
50000
60000
80000
100000
Figure 3 Population/age distribution - Source: Amsterdam O+S
8
Figure 4 Growth in Single, Double and Multiple person households to 2035 - Source: Amsterdam O+S
9
scarcity is growing rapidly | Market Structure
Market
Structure
scarcity is growing rapidly
Large Share of Regulated Housing
Currently the housing stock consists of about
400,000 units in the city of Amsterdam. The
largest shares of this total are owned by Social
Housing Corporations (46%) and owner occupiers
(32%). A small share of the housing stock is let
by private investors (22%). The share of private
rent includes ‘regulated rent’, so on an aggregate
level only 10% of the current rental stock is
non-regulated.
Compared to other European cities, this is a rather
small share of the housing stock.
As can be derived from figure 6, within
the regulated sector two segments can be
distinguished; a mid-liberalised sector, with rents
between € 700- € 1100 and a higher liberalised
sector with rents above € 1100 per month. The
current division of the rental sector is considered
Figuur 5
to be undesirable as many higher income
households occupy social sector housing. The
regulatory reforms will alter this distribution
in favour of the unregulated sector as will be
described in the following paragraphs.
The increasing popularity of
mid-liberalised rental homes
The economic importance of Amsterdam, the
high quality liveability and many amenities
(particularly the cultural environment) attract
many (foreign) highly educated young people.
This group predominantly seeks housing in the
mid-liberalised segment. A segment which, as
previously described, is relatively small.
The sector is expected to become increasingly
tighter as (all other things equal) the high income
occupiers of social housing are stimulated to
move to the unregulated segment.
Figuur 6
5%
10%
Rent Regulation
Regulated rents are all rents below the so called ‘maximum reasonable rents’ which are based on a housing valuation system, known as
the ‘points system’ or WWS. A maximum rent can be charged based on a certain number of points corresponding with the location and quality of
the dwelling. Each year the rent cap for regulated rents is determined by the government and is currently set at (€699.48 per month). Resulting
in a relatively inexpensive occupation. As a consequence, households with an high income (annual household income of above €34,678) did not
receive incentives to move up to more expensive (commercial rental) housing, thus blocking natural movement within the regulated rental
market. Until recently, no governmental interventions were implied to cope with this side-effect of social housing. Since 2013, however, additional
income related rental increases are set for these households, up to 6.5% depending on the height of the household income.
10
Social Housing
Corporations
46%
Owner Occupier
32%
Low regulated segment (Up to €561)
Low regulated segment
(Up to € 575)
Mid regulated segment (€561 - €681)
Mid regulated segment
(€ 575 - € 700)
11%
128,000
186,000
Mid liberalised segment (€681 - €1077)
Mid liberalised segment
(€ 700 - € 1100)
Private Rent
22%
74%
88,000
Figure 5 Distribution of Stock - Source: Amsterdam O+S,
Figure 6 Distribution of Rental Stock -
Adjusted Price Levels by CBRE
Source: Amsterdam O+S
Higher liberalised segment
(€ 1100)
higher liberalised segment (>€1077)
11
Market Structure | REGULATORY REFORMS PRESENT LARGE CHANGES
RESIDENTIAL DEVELOPMENTS | Market Structure
Market Structure
Market Structure
REGULATORY REFORMS PRESENT LARGE CHANGES
Changing policy scheme
Traditionally the non-regulated rental market
has been small due to the fiscal incentives in
the owner-occupier sector and subsidizing
of the social housing sector. Recent market
developments and regulatory reforms are likely
to change this structure substantially, eventually
leading to a more equitable distribution of the
housing stock, and thus creating market potential
for the commercial / non-regulated rental market.
Regulated Rental Market Reforms
In order to opt for social housing a maximum
annual household income applies. As previously
mentioned, higher income tenants occupying
social housing are facing significant rent increases
up to 6.5% per annum (in 2014). The rent increase
is expected to lead higher income households
out of the social housing market.
LARGE MUNICIPAL OWNERSHIP OF LAND
Home Ownership Market Reforms
Home owners will be confronted with several
initiatives which will affect the net housing
costs. The traditionally high loan-to-values
of more than 106% in the recent past will
be lowered to 100% by 2018. Additionally,
limitations in the fiscal deductibility of
mortgage interest and mandatory amortisation
are examples that create barriers for new
home ownership. More so, financial institutions
remain restrictive in financing home owners,
especially for people with limited equity,
fixed-term contracts or self-employment.
Forced to non-regulated sector
“Only 10% of
housing stock
Figuur
Figuur
Figuur
Figuur
Figuur
77777
non-regulated”
RESIDENTIAL DEVELOPMENTS
and RESIDENTIAL leasehold
It is expected that the reforms in both the
owner occupier and regulated rental market
will generate a significant inflow towards the
non-regulated rental market. The average costs
of home-ownership and the maximum rents
for social housing taken in consideration, it is
believed demand will substantially increase in
the mid-liberalised segment (with rents roughly
between € 700 and € 1 100 per month).
Land costs are currently calculated by the residual
value method with a Gross Initial Yield of 5.25%,
which has lowered the land value.
This decrease has had a large impact on the land
costs: from about € 60,000 per mid-liberalised
rental dwelling to about € 21,750 – € 32,500 per
dwelling.
In Amsterdam ca. 80% of all the plots are owned
by the municipality and largely distributed on
leasehold conditions. The ownership rights are
kept by the municipality. In return, a canon or
‘ground rent’ is paid. This rent can be redeemed
for a fixed period of time (mostly 50 years) or
can be paid annually. The annual ground rent is
indexed with the inflation (CPI) minus 1 percentage
point or can be secured for 10 or 25 years.
Currently annual indexed canon rents (AB 2000,
Q1 2014) are set at 2.53% of the ground value.
The fixed leasehold cannot be reviewed within the
set period. It is possible to prematurely renegotiate
and renew a leasehold 12 to 4 years before the end
of the term.
Currently many investors choose to pay the
annual canon instead of redeeming it for multiple
years due to the historically low ground rent
percentages. In those cases paying annual ground
rents instead of buying it off increases the net
return on the investments.
CHANGING LOCAL LAND POLICY
Previously land costs were derived from 92.5%
of the market value for owner-occupied housing,
thus holding back development for mid-liberalised
housing. In order to stimulate the development for
mid-liberalised rental housing, the municipality of
Amsterdam has recently changed the land costs
policy for certain parcels.
Large shortage of Midliberalised housing
stock in Amsterdam
Figuur 10
8
2
Development
Other/Withdrawal
12
Increase
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-2
-4
Figure 7 Visualisation of the pressure on the non-regulated rental market
Demolition
0
1994
32%
32%
32%
32%
32%
1993
10%
10%
10%
10%
10%
4
1992
58%
58%
58%
58%
58%
6
1991
rental market
Regulated rental market
• Lower loan-to-values
• Increasingly limited fiscal
deductibility of mortgage
rents
• Flexible labormarket
• Restrictive banks
• Ownership not the focus
1990
Non-regulated
x 1000 dwellings
Regulated rental market
• Maximum household income
of € 34,678 to apply for
social housingg
• Income related rent
increases(4 - 6.5%)
in regulated rents
• Limited development
schemes by housing
corporations
Figure 10 Construction Volumes in Amsterdam - Source: DBI/Amsterdam O+S
13
A SELECTION OF RECENT & FUTURE DEVELOPMENTS | RESIDENTIAL PROJECTS IN AMSTERDAM
RESIDENTIAL
PROJECTS IN
AMSTERDAM
A8
A10
A SELECTION OF RECENT & FUTURE DEVELOPMENTS
Completed Developments
1 Wicherskwartier 2 Amstelkwartier 8 3 Argentinië 4 Amstel Live 5 De Zee Arend 6 Miles 7 Andreas Ensemble 8 Samos 9 De Europa 10 Django A5
2
5
10
9
85
4
1
9
A10
3
1
2
3
4
5
6
7
8
9
10 10
8
3
Units: 135
Units: 109
Units: 108
Units: 56
Units: 22
Units: 71
Units: 56
Units: 187
Units: 79
Units: 74
2016 2015 2015 2014 2014 2014 2014 2014 2014 2014 Units: 130
Units: 31
Units: 200
Units: 173
Units: 38
Units: 118
Units: 46
Units: 88
Units: 62
Units: 101
Zuidschans n.a. AmstelTower 2017 Amstelkwartier 3A n.a. Kop van Zuidas n.a. Summertime ca. 2016 Gershwin Zuidas 11/12 n.a.
Gershwin Zuidas 9/10 n.a.
Fountainhead n.a.
Food Center A1
Pontsteiger
2017 Units: 158
Units: 192
Units: 130
Units: 29
Units: 198
Under Construction
8
6
9
7
2014 2013 2013 2013 2012 2011 2011 2011 2010 2010 900 Mahler
IJ4YOU King & Queen Hasselaerhof Noordertoren Kwintijn OpZuid De Halve Maen Oostpoort 3 De Smaragd Future Developments
2
1 5
4
A4
10
1
2
3
4
5
6
7
8
9
10 A10
1 7
6 7 6
A10
2
4 3
South axis
14
A9
Units: 2000
Units: 450
15
RESIDENTIAL FINANCE | THE FINANCING MARKET
THE FINANCING
MARKET
RESIDENTIAL FINANCE
Increasing foreign financing
Although the domestic debt market is still
functioning well, new sources of debt are provided
by ‘pfandbrief banks’, international insurance
companies and debt funds. The combination of the
pricing of financing and the expected improvement
of market conditions have triggered an increased
interest in the Dutch market.
Most Dutch parties are still served by the
traditional Dutch lenders ABN-AMRO, FGH and
ING, but attractive structures and pricing are more
often offered by international players.
The availability and terms of financing are largely
influenced by two aspects: the total overall volume
of financing and the financing volume per complex.
Portfolios with many small complexes for example
are slowly raising more interest although still
mostly served by traditional Dutch parties.
Knowledge of local market conditions and the
scale of these projects are named as difficulties
by international financiers.
Another complicating factor for financing is the
share of control in the homeowner’s association.
When the share of individually sold units in a
complex increases, the possibilities for financing
decrease, due to a diminished decision power in
the association.
16
The pricing and structure of financing differs
largely. Currently the traditional players are
overtaken by international players in terms of
pricing, amortisation, and terms of contracts.
On the other hand, domestic players are better
suited for dealing with smaller volumes as already
mentioned.
Margins for high quality prime assets can vary
between 170 to 200 bps (for a LTV of 60-65%).
These margins are under pressure and some
financiers are offering higher LTVs or longer
terms to remain attractive.
Stability of income
returns, increasing
shortage and
BOTTOMED-OUT PRICE
LEVELS raises much
international
attention
17
RESIDENTIAL RENTS & INVESTMENTS | MARKET DYNAMICS
MARKET DYNAMICS
RESIDENTIAL RENTS & INVESTMENTS
Increasing market rents in
Amsterdam
In the past years the rents in Amsterdam have
increased disproportionally compared to the other
major cities. Utrecht, The Hague and Rotterdam
have witnessed a stable rental development as did
the national average. Rents in Amsterdam are by
far the highest in the Netherlands, with approx.
€ 18.60 per sq m per year (Pararius, 2014).
Large share of investment in
Amsterdam
Investor appetite for residential real estate
in Amsterdam is large, as is supported by the
volumes presented in figure 9.
In Q1 about 15% of the total volume in residential
real estate in the Netherlands is invested in
residential projects in Amsterdam. It is expected
that this share will increase substantially as many
projects are about to be sold.
Yields for residential real estate
sharpening
In line with the recent investment volumes and
interest in residential real estate have sharpened.
Currently net initial yields for (prime) single
family housing indicatively move around 4.5%.
Net initial yields for multi family housing are
slightly higher (4.7%)
Figuur 9
Figuur 8
Figuur
8
€ 21
180
160
€ 19
€ 21
140
€ 17
€ 19
Figure 8 Rental Prices in G4 - Source: Pararius
18
2013
Q1 2014
Q4 2013
Q3 2013
Q2 2013
2012
Q1 2013
Q4 2012
Q3 2012
Q2 2012
2011
Q1 2012
Q4 2011
0
Q3 2011
20
Q2 2011
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q2 2010
Q4 2013
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q1 2010
Rotterdam
Q2 2010
€7
Utrecht
Q1 2010
€7
€9
40
2010
Rotterdam
The Hague
€9
€ 11
60
Q1 2011
Utrecht
Amsterdam
Q4 2010
€ 11
€ 13
80
Q3 2010
The Hague
Dutch Average
Q2 2010
Amsterdam
€ 13
€ 15
100
Q1 2010
Dutch Average
€ x 100,000
120
€ 15
€ 17
Figure 9 Residential Investments in Amsterdam - Source: CBRE
19
RESIDENTIAL RENTS & INVESTMENTS | MARKET DYNAMICS
oUTLOOK
FUTURE POTENTIAL OF AMSTERDAM
Although development volumes are increasing,
the shortage of affordable unregulated rental
housing in Amsterdam is large. The increasing
demand for this type of housing is predominantly
caused by the growing number of single person
households, often young and highly-educated
people.
The shortage is also strengthened by the
historically large share of social housing in
Amsterdam. Based on the so-called “points”
system, however, a large share of this social
housing stock can be considered ‘liberalisable’,
or transferable to the unregulated stock.
Both this latent pool of unregulated rental
housing and the increasing number of new
development schemes are providing strong
purchasing opportunities for investors. The
bottoming out of the house price levels can be
added to this, providing the right momentum
to enter the market at the bottom of the cycle.
20
21
MARKET DYNAMICS | RESIDENTIAL RENTS & INVESTMENTS
CONTACT
CBRE RESIDENTIAL TEAM
Machiel Wolters Msc MRICS
Director Research and Consulting
T: 020 626 2691
E: [email protected]
Alexander Buijs MSC MRE
Research and
Consulting
Associate Director Residential
Capital Markets
T: 020 626 2691
E: [email protected]
David Vos MSC
Consultant Capital Markets
T: 020 626 2691
E: [email protected]
+ Follow us
@CBRENederland
linkedin.com/company/cbre-nederland
www.cbre.nl
Global Research and Consulting
This report is prepared by the Research and Consulting team at CBRE Netherlands, part of CBRE Global Research and Consulting - a network of
leading market researchers and consultants who work closely together to deliver real estate market research, forecasting and strategic advice
to investors, financiers and end-users worldwide.
Disclaimer
Information herein has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and
make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness.
Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the
market. This information is designed exclusively for use by CBRE clients, and cannot be reproduced without prior written permission of CBRE.
22
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