SECTOR REPORT HOUSING MARKET

SECTOR REPORT HOUSING MARKET UPDATE NOVEMBER 2017 www.colliers.nl

28 DEMAND The number of residential property transactions remained virtually unchanged in the third quarter compared to last year. This is primarily because the supply is drying up. In Amsterdam, the number of transactions fell by 17%. However, a new record number of residential property transactions was registered by Statistics Netherlands in the third quarter. The total number of transactions amounted to 61,000 existing homes. The pressure on the housing market remains high, especially in the big cities. The pressure is also increasing in surrounding municipalities due to the strong demand from owners and users: 1. Consumers and particularly private investors are battling to buy the same product. Due to the current and future tightening of lending conditions, firsttime buyers in particular are at a disadvantage and are finding it ever harder to buy a home. Along with rising prices, this is causing buyers to focus on alternatives often towns and cities near the G4. 2. Institutional investors are still finding insufficient investment product, although the production of new homes is now really gathering pace. The number of building permits is increasing in 2017 and the order portfolios of home builders are back to 2008 levels (source: ING). At the same time, there is more and more competition: we have observed that institutional investors are increasingly having to battle housing associations in the race to acquire new build complexes with median rents. The Rotterdam and Almere housing markets are showing signs of revival and are seriously catching up with the other G4 cities. For instance, the number of homes sold in Rotterdam by the end of Q3 (5,000) was far above the total for 2016. Last year, 2,700 homes were sold there. Almere is benefiting from the pressure on the Amsterdam region. Almere is the second most popular destination for homebuyers moving out of Amsterdam, after Haarlem, and accounting for 4% of moves (Haarlem: 5%). SUPPLY In the third quarter, a new low was recorded in the stock of available homes in the Netherlands. Following a long downward trend, the figure (63,500) has fallen to a level below that of 2007 (81,000). Over the next six months, we foresee a further increase in the number of new-build homes, particularly in areas where there is high pressure on the housing market. The pace of conversions, redevelopments, and larger area developments in the Randstad is picking up, particularly at locations that were previously less popular. For 2017, the expectation is that more than 50,000 new-build homes will be completed. PRICE Levelling-off in prices of owner-occupied housing: there are signs that the Amsterdam and Utrecht markets have peaked. House prices in the cities fell or stabilized in the past quarter. The supply is relatively small in the cities, and more and more consumers are looking to alternative housing markets in the region. In recent quarters, we have seen a strong rise in house prices in Rotterdam and The Hague. Residential rents in the big cities continue to rise due to the increasing demand for homes and the dwindling affordability of properties there. This applies to both the North and South regions and to the rest of the Netherlands. Over the past quarter, vacant value ratios have remained stable or risen slightly. Our expectation is that ratios will rise slightly further throughout the Netherlands over the next six months. In the past quarter, projects at Houthavens, Zeeburgereiland, and the Zuidas business district have shown the highest vacant value ratios and the lowest yields. DUE TO THE AVAILABILITY OF REINVESTMENT RESERVES, WE HAVE SEEN THAT TRADITIONAL HOUSING INVESTORS WITH A FOCUS ON SELLING OFF EMPTY APARTMENTS ARE PREPARED TO INVEST AT A VACANT VALUE RATIO OF 100%. PARTLY AS A RESULT, TOWARDS THE END OF 2017 WE ARE SEEING A REAL BATTLE AMONG INVESTORS.

29 HOUSING STOCK NEW HOUSING DEVELOPMENTS AND FORECAST HOUSING TRANSACTIONS INTEREST RATES RESIDENTIAL MORTGAGE LOANS HOUSING SUPPLY BY TYPE DURATION HOUSING SUPPLY BY TYPE INVESTMENT VOLUME (EUR) RESIDENTIAL

30 HOUSING MARKET INDICATORS SINGLE-FAMILY MULTI-FAMILY HOUSES DWELLING EXPECTATIONS Monthly rent Randstad Northern part 1,100-2,200 950-1,500 Randstad Southern part 1,000-1,500 800-1,100 Other locations 800-1,100 725-1,000 GIY Existing housing Randstad Northern part 4.00% - 5.25% 4.25% - 5.50% Randstad Southern part 4.25% - 5.50% 4.50% - 5.75% Other locations 4.50% - 6.00% 5.00% - 6.25% GIY New housing Randstad Northern part 3.75% - 4.50% 4.00% - 4.75% Randstad Southern part 4.25% - 5.0% 4.50% - 5.25% Other locations 4.50% - 5.5% 4.75% - 5.75% Value with vacant possession ratio Randstad Northern part 90% - 110% 90% - 105% Randstad Southern part 85% - 105% 85% - 100% Other locations 80% - 95% 80% - 95% Explanation Prospects user markets (coming 6 to 12 months) ( growth, decline, stable) VISION AND EXPECTATIONS In the third quarter, the total investment volume in homes exceeded 1.8 billion. We expect that for the whole of 2017, the investment volume will end up below the level for 2016 ( 4.5 billion), at over 3 billion. In the final quarter, there will be several more large transactions involving parties such as Patrizia and Vesteda. For 2018, we expect an increase in the investment volume as a result of ongoing demand combined with increased new build production: 70,000 homes in 2018. This will also lead to more existing home products coming on the market as investors seek to refresh their portfolios as a result of new build projects being delivered. In the past quarter, we have seen a fall in gross initial yields in existing build. Only in Amsterdam, we have seen the returns for new build fall below 4%. For the next six months, we expect a further fall in initial yields for both existing and new build homes. As a result of stricter mortgage requirements (100% standard), combined with an anticipated rise in interest rates, we expect consumers to borrow less in 2018. This may have a slow-down effect on prices and result in a levelling-off of the upward growth curve in house prices. This will lead to an increased focus on the regional housing market. On the other hand, nearly 50% of banks have eased their mortgage criteria in the third quarter (source: De Nederlandsche Bank). The increased competition between banks and insurance companies and a reduced risk perception are cited as reasons for the less stringent criteria. Borrowing capacity is also rising again slightly due to an increase in wages.

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SERVICES Arnold Doornewaard Director Residential Investments arnold.doornewaard@colliers.com +31 65 359 14 15 Tom-Peter Twigt Associate Director Valuations tom-peter.twigt@colliers.com +31 61 326 35 51 Bart Stek Head of Research bart.stek@colliers.com +31 62 239 54 07, Amsterdam 2017 Except for the exceptions stipulated in or pursuant to Dutch copyright law, none of the contents of this publication may be reproduced by way of printing, photocopies, automated data files, the internet or in any manner whatsoever without the prior written consent of Nederland. The authors have made every effort to ensure that the publication is as reliable as possible. Nevertheless, they cannot accept any liability for any inaccuracies that may appear in it.