#PROVADA The Chinese are on their way to the Netherlands

China will be the latest source of foreign equity entering the real estate market in the Netherlands, the Provada real estate fair in Amsterdam heard on Wednesday.

'Watch the Chinese - they are coming here big time,' Marco Hekman, CEO of CBRE Netherlands, said. To date the only notable Chinese investment in Dutch real estate was the joint acquisition by AXA Real Estate and Chinese hospitality group NHA of the Hotel Krasnapolsky in the centre of Amsterdam for €157 mln in 2013. Hekman said, however, that a lot of equity from China is now targeting the Netherlands.

Japanese investors have also been studying the market and at least one Japanese investor is in the due diligence stage of a transaction, Hekman told PropertyEU´s Netherlands Investment Briefing, held at Provada. Other potential capital streams from Asia-Pacific include superannuation funds from Australia and New Zealand.

PropertyEU reported in May that Asian investors were on course to secure the Symphony and ITO-SOM office complexes in Amsterdam's Zuidas district - two of the largest office assets on the market in the Netherlands recently - but were ultimately pipped at the post by German fund managers.

The residential property market rather than the prime office sector has seen the biggest investment in recent days. In the largest deal UK-based Round Hill Capital acquired a residential portfolio from a fund managed by CBRE Global Investors for €180 mln.

Kirk Lindstrom, managing director in charge of German and Dutch residential investment at Round Hill, told PropertyEU that the acquisition was carried out via a Luxembourg-regulated fund. Its investors include high net-worth individuals, institutional investors and investment funds from across the globe.

Round Hill's deal was the largest in the Dutch residential market since the outbreak of the crisis. Larger deals could follow, as there are one or two portfolios on the market valued at €500 mln or above.

Lindstrom: 'There is no explicit size for the fund. Our investors have said that if the right big-volume portfolio comes along they will address that.'

The Dutch residential market has moved up the target lists of both domestic and international investors very quickly in the space of a few months, the Netherlands' briefing heard.

Aside from the Round Hill acquisition, Bouwinvest, the largest unleveraged investor in Dutch residential properties, announced during Provada that its Dutch Residential Fund was acquiring 572 homes in Amsterdam and in The Hague/Rotterdam area for a total investment of about €150 mln.

REGULATORY CHANGES
One of the drivers has been an improvement in the regulatory system.Addressing the briefing, Dutch housing minister Stef Blok said that the government had taken steps to address the high mortgages and mortgage rebates available to private home owners and to liberalise rent control limits in the private rental sector. In addition, the encroachment of the country's social housing associations on the private rental sector had been rolled back.

Housing associations perform a valuable service, he said, in providing accommodation for people on low incomes but they should not be competing with the private sector. 'It is very important for the Dutch residential real estate market that investors are not confronted with an unlevel playing field,' the minister told the briefing.

Bouwinvest CEO Dick van Hal told the panel that the €2.6 bn residential fund had been opened up to foreign investors. This is because Bouwinvest sees more interest from institutional investors for the fund since the timing is right to enter this non-regulated housing market.

The government’s move to rebalance the residential rental sector in the Netherlands have combined with what Bouwinvest believes is a cyclical low in the market after five years of price falls, to create a very attractive 'sweet spot' for investment in 2014.

This was one of the key findings of the report http://www.bouwinvest.nl/media/125690/Dutch-Residential-Investments-spring-2014.pdf which van Hal highlighted during the briefing.

The report was prepared by consultants Finance Ideas under the authorship of Professor Piet Eicholtz of Maastricht University and received the full support from minister Blok.

Domestic residential assets have traditionally formed a larger part of Dutch institutional real estate portfolios – on average 49% — than in any of the other five countries in Europe with sizeable institutional holdings: Switzerland at 47%, France 12%, Germany 12%, Sweden 12%, and the UK at 4%, according to Investment Property Databank (IPD) data.

But the report noted that Dutch residential property has been almost entirely overlooked by international investors in the past, due to a lack of local knowledge and expertise and competition from other domestic sources of capital such as aspiring homeowners, private investors and social housing providers — which have dominated the rental market. Therefore, new investor capital coming into the sector needs the support of a strong local player, Van Hal added.