In the previous Investment Update of April 2024, we were already cautiously optimistic about the potential recovery in real estate markets. Despite investment volumes still being at historically low levels, we observed a stabilization in prime yields during the first quarter.

In the second quarter of 2024, we see a strong investment result of 2.6% in the real estate market (source: MSCI). This is primarily driven by a 3.1% return in the residential sector. The retail sector, which had already shown stable returns for several quarters, recorded a return of 0.7%. The healthcare sector also performed positively, with a return of 1.7%. All segments showed improved quarterly results for the second consecutive quarter.

However, we remain cautious about the further recovery of the real estate market, despite strong fundamentals in the occupier markets. Investment markets remain volatile. For example, in August, we saw significant downward adjustments in the stock market, partly due to disappointing employment figures from the United States. Additionally, the market is still awaiting interest rate cuts, which have largely been priced in.

The economic data also presents a mixed picture. In the second quarter, the GDP in the Netherlands grew by 1% compared to the previous quarter. In Germany, the largest economy in Europe, there was a slight decline of 0.1%.

In this investment update, we give special attention to the housing shortage. The housing challenge is unprecedented, with a target of 900,000 homes, of which approximately 10% needs to be realized in the mid-rental segment. This implies that around 40 to 45 billion euros in investments from market parties is needed to achieve this goal.

Additionally, the Netherlands faces a significant sustainability challenge. Here too, we estimate that more than 22 billion euros is required from market parties to make mid-segment rental housing more sustainable. Both challenges underscore the crucial role of institutional capital in realizing these major objectives.

Casper Hesp, Director Investment Management