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Market opportunities and threats

Bouwinvest has identified a number of opportunities and threats in the Dutch residential market that could affect the Residential Fund’s future returns and growth targets. How the Fund plans to take advantage of these opportunities and mitigate any threats is outlined in the Strategic Objectives chapter.

Last year saw increasing pressure on the housing market, due to the growing gap between supply and demand. We expect this pressure to continue the coming years, driven by the ever-growing demand for homes (+800,000 households through to 2040) and the lag in the construction of new-build homes. In 2019, we saw an uptick in the number of home-seekers looking to areas around larger cities, due to the lack of affordable homes in major urban centres. The growing scarcity will continue to drive occupier demand and value increases, both in large cities and satellite towns, so the residential market will remain interesting for investors. However, these factors are increasing competition for high-quality and sustainable assets, which is pushing up asset prices.

New (local) policies related to the (affordable) mid-rental segment - maximum (starting) rents, minimum surface areas, lower rental indexing, mandatory operating periods, and ESG requirements - were already impacting investment cases and the feasibility of targeted returns last year and this impact is unlikely to abate anytime soon. Despite this, we still expect the mid-rental segment to have a lower risk profile than standard liberalised sector residential real estate, thanks to the strong and stable demand. On top of this, investing in the (affordable) mid-rental segment can be viewed as a socially impactful investment.

Finally, key threats include current global tensions (for instance, on the trade front), Brexit and any changes to the ECB’s monetary policies. The effect of any sudden and unexpected changes that have a negative impact constitutes the greatest danger to the broader financial markets and in turn to the various real estate markets.

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