Dutch investment manager Syntrus Achmea expects real estate investors to focus on the Netherlands in their widening search for yield.
Presenting the company鈥檚 outlook for the next three years, Henk Jagersma, the company鈥檚 chief executive, said yield compression had accelerated in recent months.
鈥淭he increasing competition has added pressure on yields, as investment strategies further up the risk curve are becoming attractive again,鈥� he said.
According to Jagersma, the best residential locations in Amsterdam are now achieving yields of approximately 4%, compared with 5% last year, 鈥渕eaning that all the losses since the financial crisis have been made up in the past 12 months鈥�.
He noted, however, that it was becoming increasingly difficult for investors to source good-quality rental residential stock, 鈥渁s municipalities prefer to sell to the more lucrative private owner-occupier market鈥�.
Despite the significant rise in residential prices over the year, particularly in the Randstad, Syntrus Achmea dismissed the notion that a property bubble was forming.
鈥淎s a result of population ageing, strong urbanisation towards the main cities, as well as the increase of single-person households, there is still demand for appropriate housing,鈥� Jagersma said.
Jagersma said investors were returning 鈥渋n force鈥� to top Dutch retail locations in Amsterdam but that rents and prices in smaller cities and rural locations would continue to decline.
Amsterdam, he said, was the 鈥渙nly real bright spot鈥� in the office market, where vacancy rates of around 17% are still among the highest in Europe.
The chief executive at Syntrus Achmea RE&F 鈥� the largest property and mortgage investor in the Netherlands 鈥� also predicted the number of pension funds that invest in residential mortgages would increase.
The number of schemes investing in residential mortgages increased by eight to 46 this year, growing the combined investments by 25% to more than 鈧�5bn, he said.
Jagersma added that he was expecting another increase of 鈧�1.6bn next year, following the conclusion of a contract with asset manager PGGM on the sale of mortgages to participants in the 鈧�161bn healthcare scheme PFZW, PGGM鈥檚 main client.
The target is to sell 鈧�3bn of mortgages over the next five years.
