Investment in Dutch real estate showed an improvement in the first quarter of 2014 but still underperformed other asset classes, according to IPD's latest report on the Dutch market.
Investment in Dutch real estate showed an improvement in the first quarter of 2014 but still underperformed other asset classes, according to IPD's latest report on the Dutch market.
Dutch property yielded a total return of 0.6% in the first quarter, compared with a return of -0.2% for the fourth quarter of 2013, according to the IPD Netherlands Quarterly Property Index.
Although returns improved in the first quarter, compared with the other asset classes, the index underperformed. The best performing asset in the first quarter, bonds, returned 5.1% (JP Morgan 7-10 years), while property equities returned 1.8% and all equities 1.1% (MSCI). Price inflation was 1.0%.
Overall property values fell -0.8% in the first quarter, still depreciating but at a slower rate than the 1.4% seen in Q4 2013. The quarterly income return was 1.4% in Q1 compared to 1.3% in Q4.
Vacancy rates have been stable across the board in the last four quarters, but declined to 4.2% from 4.8% in the residential sector and from 15.7% to 13.7% for offices. Retail and industrial saw an increase in vacancy rates to 4.9% for retail (4.6% in Q4) and 22.4% for industrial (18.2% in Q4).
While the industrial sector (a relatively small sector in the Quarterly Property Index) showed a negative return of -0.7% in Q1 2014, all other sectors yielded positive returns, with residential and offices returning 0.8%. Retail, for a long time the best performing sector in the Dutch index, had a positive return of just 0.1%.
Capital depreciation remains the reason for the relatively low property returns recorded in Q1, as all sectors showed negative capital growth. Industrial had the most negative capital return of -2.3% in Q1, while retail’s capital growth of -1.4% resulted in a total return close to zero. Offices had a capital growth of -1.0% with residential at -0.4%.
Lorenzo Dorigo, vice-president and head of Benelux at IPD, said: 'Although the index has slightly improved, the reality is that negative capital growth is still offsetting most of the income return. Let’s hope the market will now turn around, given that macro-economic indicators for the Netherlands are improving.'