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Investor appetite for residential still growing

Atenor's 'La Sucrerie' in Ath is the type of new development attracting interest from investors.
Atenor's 'La Sucrerie' in Ath is the type of new development attracting interest from investors.

Over the past few years, the residential real estate market has made its way into the mainstream, as an asset class in its own right. This has occurred to the point that the major players in the industry are now becoming increasingly involved in a domain which, previously, was reserved for specialist residential players.

One of the companies now paying attention to residential is real estate advisor CBRE, and in a recent report it looks at how the residential market is likely to evolve in Belgium.

One format expected to grow this year, says CBRE, is co-housing. While not new, its professionalization and modern offering is. These facilities typically offer eight to twenty rooms with shared common spaces and cater to a diverse client base from the new graduate to the middle-aged divorcee. Along with facilitating social interaction, flexible contract options are also an appeal. High net worth and return potential mean that professional investors find this market attractive, another advantage being its hybrid residential-hotel nature.

CBRE also states that, in terms of the overall residential market, increasing values and investor interest show no signs of slowing down in 2020. Steady population growth (just under half a percent in both 2019 and 2020 in Belgium), continuing low interest rates, limited investment-grade opportunities, and a growing diversity of residential offers should support this sector through the year.

New developments

Households are also changing. Belgium will continue to see growth in single parent households, co-habitation, and, in particular, single households. New development has and will continue to react to these changes by, for example, creating smaller overall units and adopting diverse contract types.

The success of new construction will continue in 2020, supported by several dynamics. One is that this format offers individual investors a store of wealth and capital preservation from low interest rates on savings. Secondly, more housing is required to meet healthy demand. Thirdly, increased urbanism requirements are widening the gap between new and second-hand properties in terms of efficiency, comfort, and regulatory conformity.

However, with only moderate numbers of permits being issued for new constructions and, in Brussels at least, a long waiting time between permit request and granting, the availability of assets for institutional investors remains limited. The high appetite for such bloc assets means that the investment yields of those that are available are not too dissimilar to unit sales. And, continues CBRE, we are still at the early stages of portfolio formation that allows for profitable self-management in Belgium at a scale we have seen in other countries such as Germany which have a robust rental market.
Tim Harrup
27-05-2020
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