Residential market attracting more investor attention

Tim Harrup

JLL begins its residential survey by saying that investor appetite for assets in the ‘Living’ sector, which includes multifamily assets, senior housing and student housing is growing. Particularly in the relatively new (for Belgium) multi-family sub-segment both international investors and local players are actively looking at opportunities. This increased competition on the demand side, in combination with a limited but growing supply of quality, energy-efficient built-to-rent assets, results in a yield compression that is narrowing the gap with the investment market for individual units. In the country’s largest cities in particular, we are seeing growing investment momentum for multifamily assets.

In general, investor appetite for the multi-family segment in Belgium rose markedly in the past 12 months. The stable returns in the segment in the uncertain circumstances caused by the pandemic have caused investors to spread risks. Demand turned to ‘Beds and Sheds’, short for residential and logistics properties, which have shown resilience during the pandemic. The steady returns and the growing letting market in urban areas and the rental growth prospects have attracted the interest of institutional investors, both national and international. So far, however, investment opportunities have been limited as apartments have been easily sold individually. Given the yield compression in the segment over the past 12 months, the gap between returns on block sales and individual sales is reducing, which creates opportunities for block sales. The volume invested in ‘Living’ in 2020 in Belgium amounted to € 856 million, split between €535 million senior housing, € 226 million student housing and multifamily residential. Investment in multi-family properties in 2020 amounted to €95 million.

Permits and Covid

The delivery of building permits stalled in 2020 and will cause a delay in the delivery of new residential stock. The procedure for the obtention of building permits varies from one region to another and can cause long delays. The combination of long deadlines to obtain building permits and the strong demand for new housing limits the available offer.The lockdowns during the Covid-19 crisis have also had an impact on the delays applicable to the delivery of building permits in all three regions, but particularly in the Brussels Region. The limited number of building permits obtained during 2020 will become visible on the market within 18 to 24 months when the completions are scheduled. The lack of offer will enhance competition between buyers and, therefore, increase sales prices which have already risen steeply in recent years.

Covid-19 has also disrupted the way in which work is organised. Home-working has temporarily and suddenly been introduced on a much broader scale than before and will change our working habits. A well equipped and connected home office has become a must for many people. Others are in need of more space to relax at home and add a terrace or a garden to their list of criteria. In JLL’s Living Survey 2020, respondents expressed a clear preference for these options, whilst options such as the availability of a car parking space lose importance, particularly for those living in urban areas. It can be expected that this evolution will have its impact on both the transaction and the letting market.