Foreign investors still keen on the Netherlands
In the face of uncertainties, both economic and geopolitical, investors have in the past tended to confine themselves to domestic investments. That also seems to be the case now: worldwide, 22% of all investments in commercial property in 2022 were cross-border, whereas five years ago this was still about a third. Nevertheless, the foreign capital invested in Dutch property in 2022 was still in line with the total volume invested by foreign investors in previous years. An example of the international interest is the purchase of the headquarters of Booking.com by German investor DEKA Immobilien for €566 million.
One of the reasons for this is that the fundamentals remain strong in the Netherlands.
This is apparent, for example, from the rate of economic growth achieved in 2022: this was considerably higher than in neighbouring countries. The unemployment rate is also one of the lowest in the eurozone, and owing to restrictive spatial planning policy many market segments have experienced long-term scarcity. Moreover, the logistics market, which has attracted a great deal of interest from investors despite economic uncertainties, is largely dominated by big foreign investors specialising in this segment. On the other hand, the housing market consists mainly of Dutch institutional investors, which have substantially scaled back their investments in this segment due to rising building costs, transfer tax and regulation. However, the position of the Netherlands will very probably be adversely affected by the tax changes in 2023, particularly the increase in the rate of transfer tax as of 1/1/2023 (up from 8% to 10.4%) and in the rate of corporate income tax.
“The overall investment volume is, however, expected to weaken further in 2023.”
The overall investment volume is, however, expected to weaken in early 2023.
This is mainly because a new price equilibrium has not yet been reached. Buyers and sellers cannot yet agree on the current value of properties. Initial yields increased in the 4th quarter of 2022 and are expected to rise still further once there is a fresh interest rate hike by the ECB. The announced interest rate increase of 0.5 of a percentage point in February of this year will have an effect on financial markets, just as previous interest rate hikes have driven up initial yields, as can be seen in the chart below.
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