As an investment real estate appears to perform well. Compared to shares and bonds it performs even outstanding. This despite the tragic events of September 11, 2001.
The specific characteristics (e.g. inflation-linked) which institutional investors attribute to real estate appear to be true. This makes real estate, specifically today, an attractive and stable investment category. One of the disadvantages however, is that money to invest in real estate is scarce, mainly as a result of the poor performance of shares. This makes that the share real estate traditionally holds in investment portfolios has been reached.
Result of 11.4%
While shares showed a negative result of 19.2% during 2001, real estate realized a result of 11.4%, made up of a value increase (5.1%) and increases in rental income (6.3%). In terms of volume real estate investments were stable. At the same time the trend from direct investments to indirect investments continued.
Increased professionalism of the real estate investment sector ensures transparency to stake holders. As a result the real estate sector increasingly produces data, which may be compared with shares, stocks and bonds. Recent studies show that real estate has clear added value to pension fundsâ€™ investment portfolios, specifically in the area of yield and risk profile. On the basis of the so-called ALM study, where long-term financial obligations are taken into account, real estate may take up 25% to 30% of an investment portfolio. This is substantially more than pension funds have today.
Concern on rental policy
The IVBN did not conform to the short-term rental policy. It is considered â€˜disastrousâ€™ to the rental market. Also as far as the long-term rental policy is concerned, the IVBN expresses its great concern. In order to realize a healthy housing stock long term, the rental and private housing market should be totally reviewed. The vast increases in house prices, combined with the prudent rental policy over the past few years, have turned rental accommodation into an attractive alternative.
The result is that there is no movement between the rental and the private market, but there is also no movement in the rental market itself. Moreover, todayâ€™s rental policy creates a gap between the cheaper rental accommodation and the more expensive market segment, which makes it more difficult for starters to find affordable accommodation. Noticeably the middle segment will become less attractive to investors, whereas today this segment is a substantial part of their portfolios.
The IVBN considers a prudently managed market a requisite for a well functioning rental market, otherwise it believes that investments in rental accommodation will drop dramatically, which in turn will result in an increased burden on the governmentâ€™s subsidy policy. Government policy should be aimed at realizing (subsidized) housing for specific target groups and at realizing a well-balanced housing stock long term. â€˜It requires political courage to add houses in the top end of the market, which ensures the required movementâ€™, according to the IVBN.
For more information please visit www.ivbn.nl.