Economy
- 6.5
  
  Economic growth
  
  The GDP is increasing but in a slower pace than before. The economic growth, measured in change of GDP, was estimated to be 0.2% in 2018Q3 relative to 2018Q2. It was the lowest growth rate in two years and due to slower increase in investments, for example in construction. Still, GDP growth in the year 2018 is expected to be almost equal to growth in 2017 and CPB (Netherlands Bureau for Economic Policy Analysis) predicts a continuation of the current economic growth levels in the upcoming years.
  
  Source: Statistics Netherlands
- 9.8
  
  Unemployment
  
  Unemployment has been rapidly decreasing since early 2014 and reached a level of 3.7% in the third quarter of 2018. The labor force in The Netherlands exists of almost 9 million people and only 330,000 people are unemployed. In principle, this is a positive development, but the downside is that significant shortages of personnel occur in certain sectors such as the construction sector. This puts a brake on the housing construction and therefore affects the housing market.
  
  Source: Statistics Netherlands
- 9.5
  
  Inflation
  
  Inflation between 1.5% and 2.5% is generally regarded as a healthy level. But the last two years inflation was frequently below this healthy level. Since July 2018, inflation has been close to 2%. Current inflation is primarily driven by the increase in housing prices, water and energy prices and the transport sector.
  
  Source: Statistics Netherlands
Housing
- 10.0
  
  Market liquidity
  
  It’s no secret the housing market is tightening as demand increases and there is lack of (suitable) supply. Following this trend, the market liquidity reached a historically low of 0.37 which exceeds the record of 0.45 in 2007. This is good news for people selling a house, however, homeseekers don’t have many options left to choose from.
  
  Source: Calcasa
- 8.2
  
  Rental prices
  
  The prices of free-market rental homes are not as volatile as the price-development of owner-occupied homes. However, there is a connection between them. When prices of homes for sale are increasing, rental homes will become relatively cheap. This opens the door to higher prices of free-market rental homes, although it will always be within tight contractual limits. The Calcasa free market rental index reached a level of €1270 per month in the third quarter of 2018 which is an increase of 14.3% on a 3-years base. It must be noted that these numbers include furnished homes and rental price-developments of unfurnished homes from institutional investors are more moderate.
  
  Source: Calcasa
- 10.0
  
  Transaction prices
  
  House prices are rising at an accelerating pace in the Netherlands, mainly due to strong demand, combined with lack of adequate housing supply in the market. Low interest rates on mortgages is also a strong driver. House prices rose 9% on an annual basis from € 267,000 to € 292,000 in 2018 Q2. This price is an all-time high and beats the former record of € 260,000 in 2008. The pace of the rally is high, with a 9% year-on-year increase, but not as high as in 1999/2000 when the increase was around 20%.
  
  Source: Calcasa
Consumers
- 7.8
  
  Consumer confidence
  
  Consumer confidence was on a high level with scores over +20 between Nov-2016 and July-2018. Recently, it shows a decrease, partly related to the financial situation of customers in the past 12 months. Still the indicator is quite positive and there is a considerable willingness to buy. Historically, the consumer confidence indicator is significantly above its long-term average over the past two decades (- 3). The indicator reached an all-time high in January 2000 (+ 36) and an all-time low in March 2013 (- 41).
  
  Source: Statistics Netherlands
- 5.9
  
  Affordability
  
  Where some people refer to the current situation on the housing market as a housing bubble, others say it’s still in balance given the low mortgage rents and high household income. Fact is that house prices are increasing at a higher pace than income growth. This situation puts more pressure on affordability of housing. The score of 5.9 indicates that affordability is becoming an area of concern. A relative higher part of net incomes is spent on housing. It should be noted that this score relates to the affordability of a mortgage loan, however this development can also be seen in the rental market where the housing cost to income ratio increases.
  
  Source: Calcasa
- 6.7
  
  Satisfaction
  
  Customer satisfaction is high on the agenda of many institutional investors. Tenants of free-market homes pay a decent amount of rent and therefore except something in return. Given the score of 6.7, which reflects the performance of institutional investors from a tenant’s point of view, decent quality is offered. However, there is more to be gained. Whereas the home itself and the surroundings are rated above average, there are several points to improve regarding the customer service.
  
  Source: IVBN/CustomEyes
Sustainability
- 6.0
  
  Energy label
  
  Buildings are responsible for approximately 40% of energy consumption and 36% of CO2 emissions. Therefore, increased renovation of existing buildings has the potential to lead to significant energy savings and lowering CO2 emissions. The energy performance of Dutch residential buildings is measured according the Energy Performance of Buildings standards. This standard comes down to a ranking from label A tot G, where A is the most energy efficient. Currently, about 43% of the Dutch homes are registered with an energy label. At the end of 2017 29% of all Dutch homes with an energy label are registered with an A or B label and 31% is listed with a C label. Together, the A, B and C labels represent more than half of all registered labels. At the same time, this means that energy performance is still lagging behind in 40% of Dutch homes.
  
  Source: Energy Performance of Buildings Directive / Netherlands Enterprise Agency
- 5.7
  
  Green energy
  
  In 2017, total energy consumption in the Netherlands was more or less equal to the consumption in 2016. Compared to 1990, energy consumption increased by nearly 10%. On the other hand, consumption per capita dropped by almost 5%. An important contributing factor is the increasingly efficient use of energy sources over the years. The building environment plays an important role in this improvement, because central heating boilers have become increasingly economical and new buildings have better insulation. In 2017, fossil fuels accounted for 92% of total energy consumption, which is approximately the same as in the previous year. The remaining 8 percent was generated from renewable (green) energy sources, nuclear energy, waste and imported electric current. Unless, we are moving in the right direction, there is still a long road ahead to reach the levels which are agreed upon with other European countries.
  
  Source: Statistics Netherlands
- 7.7
  
  GRESB
  
  Since 2010, the Global Real Estate Sustainability Benchmark (GRESB) has provided a tool to compare the sustainability of property investment funds. The benchmark rates environmental management practices and their implementation. Dutch non-listed residential companies scored a total of 77 points on average in 2018. This upturn of 7 points compared to 2017 is even better than the increase of 3 points in 2017 compared to 2016.
  
  Source: GRESB

- Consumers
  6.8
- Economy
  8.6
- Sustainability
  6.5
- Housing
  9.2
Housing Market Indicator

overall score, actual per Q3 2018

Housing Market Indicator

In 2018, we have learned to expect the unexpected, whether it be politics, weather or housing. While some experts expected the Dutch housing market to cool down in 2018, the market actually heated up.

Read more

Disclaimer ⟩
- About the Housing Market Indicator
- Cities are good for us:
  Greg Clark on Urbanisation
- Colophon ⟩
- Downloads ⟩

7.9

Housing Market Indicator

overall score, actual per Q3 2018

About the Housing Market Indicator

The Dutch housing market is one of small proportions but with many faces. Addressing and interpreting the differences in the right way is key for investors. As an objective indicator of the current market situation we developed the Housing Market Indicator (HMI). This tool provides a quick but thorough overview of the Dutch housing market from a residential investors perspective. The HMI will be updated twice a year.

The HMI is made up of 12 key determinants. Not only economic and housing market developments are included, developments in the field of sustainability and the situation of Dutch (residential) consumers are also important factors. The rental housing market and the satisfaction of tenants in the important middle segment of the housing market are reflected in the HMI. This unique composition of factors constitutes an indicator which offers a solid reflection of the elements that are important for Vesteda as a residential investor and for other investors.

The 12 drivers of the HMI are divided into 4 different quadrants with 3 drivers per quadrant. The 12 drivers are scores on a scale from 1 to 10, based on the best available data. We believe transparency is very important, that is why we only used public-data. It should be noted, however, that with some drivers the data lags behind the market situation as no recent data is available. To arrive at a score, the data has been placed in historical perspective as far as possible. On some drivers, there is little historical data available which means only data from recent years is used. The data from most drivers was then scored on a 10-point scale where the historical lower and upper limits were determined as the maximum range. Only on the drivers GRESB and customer satisfaction are the actual scores used. The average of the scores on the 12 drivers was then used to calculate a final score. As the indicator only contains historical data, predictions are not included in the HMI.

As the manager of the largest residential fund in the Netherlands, Vesteda believes it is important to increase the knowledge on the Dutch residential investment market and to promote transparency. With the Housing Market Indicator, Vesteda therefore offers more insight into current market developments on the Dutch housing market.

Cities are good for us:
Greg Clark on Urbanisation

This is the metropolitan century. From 1980 to 2080 humankind is making a spectacular and historic trek from being 40% to 80% urbanised, and cities are now the dominant way of life. Two billion more people will be added to the world’s cities between now and 2050. We are already a third of the way into this century. In effect, this means that over the next 50 years, a new global urban system is being set in train.

The Top 300 Metropolitan Areas in 2018, by GDP

Source: JLL (2018)

Cities reduce poverty, they don’t cause it

Other things being equal, cities are good for us. A new science of cities is evolving. The World Bank’s 2009 World Development Report showed that the rise in living standards in lower income countries is correlated with urbanisation: cities reduce poverty, they don’t cause it. Recent OECD studies have shown the economic advantages of urban proximity and exchange: cities help make businesses more productive. The IPCC observes that cities are the key sites for climate change action: smarter cities can be very environmentally efficient. Reports from the UN highlight the importance of well-run cities to secure development goals. In almost all fields of daily life, the city is an important context, or shaper, of life chances and human outcomes. The promise of global urbanisation is a better life and a better planet. We can identify 10 global megatrends that are shaping cities:^[1]

10 global megatrends that are shaping cities

We also observe a series of concurrent disruptors that are distinct from these mega-trends but have the capacity to accelerate change or to ‘tip’ or ‘nudge’ the way the mega-trends play out and how nations, regions, and cities respond.

Concurrent disruptors

^[2]

Urbanisation brings critical choices and challenges

This metropolitan century is also full of uncertainty, risk, and unintended consequences. Those who lead and manage cities look to avoid becoming locked in to old models of growth that are unproductive, unsustainable or unequal. The side effects of city growth can be seen in pollution, inflation, segregation, and congestion. Urbanisation brings critical choices and challenges that must be addressed.^[3] Without intervention growing cities quickly exceed the capacity of their systems and bad urbanisation ensues. Populations then start to resist the urban growth path.

But what is clear is that none of the disruptors, even in combination, indicate that a cycle of large-scale de-urbanisation might take place in the foreseeable future. Instead they all reinforce the need for cities to adapt the way they are planned, managed, financed and led in order to cope with unexpected drivers of growth and change that lie ahead. Together the megatrends and possible disruptors present a variety of imperatives for cities, and for how their growth will have to be managed in order that they stay competitive, liveable and sustainable in the next 30-40 years. The shift is underway worldwide towards effective growth management of cities, integrated city regions, and fit-for-purpose city systems and tools with which to plan for the longer term.

Dutch cities are leaders

Despite the smaller size and competitive pressures that Europe’s cities face, the metropolitan century has the potential to be good for Europe. Europe’s cities are better equipped with universities, cultural facilities, transport systems, and flexible urban forms than many cities in other continents. Europe’s cities have been quicker to embrace the imperative of climate change and their populations are less resistant to the reforms that are needed to make urbanisation work. Dutch Cities benefit from great connectivity and have flexible means to grow using their metropolitan areas and multi-city regions as a system for growth management. Dutch cities are leaders in technologies and innovations that the world wants to buy. So Dutch cities can succeed by seeing urbanisation in the rest of the world not as a competitor but as customer for Dutch innovation.

Imperatives for all cities

^[4]

Growth in cities is now a certainty; but whether that is bad growth or good growth depends on other crucial variables. These include the quality of urban leadership, infrastructure investment and metropolitan planning, and how far they are combined. It also includes how the five new urban economies will drive land and systems reform: the knowledge and innovation economies, sharing economy, circular economy and experience economy can all act as catalysts for better urbanisation. They also drive new real estate business models.

Build affordable housing in growing cities

The built environment of cities is undergoing profound change. Real estate must take on three new pressures and adjust to the changes they bring: the integration of public and private space presents a stewardship conundrum; the specialist requirements of new industries and enterprises involves new amenities and infrastructures, changed business models and increased flexibility; and the more intensive use of all space means a new life cycle approach and distinct asset management tactics. New zones, districts, quarters and precincts are emerging as new populations and economic activities find their spatial logic.^[5] For residential developers there is the first imperative to build genuinely affordable housing in growing cities. This requires more efficient use of space. So, sharing approaches are growing, and this means attention to public and shared space. This requires new mixtures and use and more popular density. A second imperative is to reduce residential segregation by building mixed income settlements. Finally, the challenge is make zero carbon housing the market norm.

We are only one third of the way into this metropolitan century, but we can already see that the real estate sector is in reform.

1 Great Australian Cities; Clark, Moonen, Nunley, PCA May 2018
2 ibid
3 Jadwab, R., Christiaensen, L. & Gindelsky, M. (2015). 'Demography, Urbanisation and Development: Rural Push, Urban Pull and…Urban Push?", Policy Research Working Paper 7333. World Bank Africa: Washington D.C.; Robers, B. (2014). Managing Systems of Secondary Cities. Cities Alliance: Brussels.
4 ibid
5 RICS Confidence, The Metropolitan Century. Greg Clark 2018

Prof. Greg Clark CBE FAcSS

Housing Market Indicator

In 2018, we have learned to expect the unexpected, whether it be politics, weather or housing. While some experts expected the Dutch housing market to cool down in 2018, the market actually heated up. Driven by growing scarcity and a strong economy, the housing market reached new record highs. This upturn is reflected in The Housing Market Indicator*, which rose to a level of 7.9 in Q3 (Q1: 7.6).

The index is mainly driven by economic developments and the situation on the housing market. Solid economic growth, low unemployment numbers and especially above-average price developments are the main drivers.

On the consumer side, we can see the downside of price developments, given the reduced affordability of housing in the Netherlands. There is an increasing number of households running out of housing options in the larger cities. This applies particularly to households in the lower part of the middle-income class.

Another area of concern is sustainability. Albeit the score is a reasonable 6.5, developments in the Netherlands on this matter remain limited. It is true that the share of 'green' energy that we use is increasing, the pace at which this is happening is still low. We wonder whether the measures taken by the government, large companies and the consumer will be sufficient to trigger the necessary acceleration. However, sustainability is high on the list of priorities among residential investment managers. This is reflected in the higher overall GRESB score of all Dutch non-listed residential funds.

Economy

Housing

Consumers

Sustainability

Consumers

Economy

Sustainability

Housing