Savills foresees three strategic shifts for Dutch residential real estate in 2024

International real estate advisor Savills has published a new report on the Dutch ‘Beds’ sector, providing a comprehensive analysis of the factors influencing the Dutch real estate market, focusing on the private rental market, investment strategies, and the Purpose-Built Student Accommodation (PBSA) and Co-Living sectors.

Despite favourable supply-demand fundamentals, with population and household growth continuously exceeding expectations, the report highlights that Dutch residential investment volumes plummeted and are now more than three times lower compared to the peak years of 2018, 2019, and 2020. This significant decline in investment volumes signals a paradigm shift where traditional investment strategies are challenged.

Robert Ciggaar, Associate Director Residential Investment at Savills in the Netherlands, says: “Real estate investors need to navigate this new reality and reconsider their investment strategies, potentially exploring alternative segments such as Purpose-Built Student Accommodation (PBSA) or adjusting to the changing preferences in the Co-Living sector. The report emphasises the importance of adapting to the evolving market conditions and considering long-term impact strategies in the face of regulatory uncertainties and a challenging macro-economic environment.”

The report highlights three key trends to watch in 2024:

1. Population growth outpacing new developments: The report highlights population and household growth are continuously exceeding expectations, mainly driven by higher levels of immigration. The latter is a key driver for demand in the private rental sector, and even more so for the fast growing Co-Living and PBSA sectors. On the supply side, new developments keep lagging behind demand.
2. PBSA and Co-Living boom: Both sectors rely on strong drivers, such as the internationalisation of education, reinstatement of the basic grant, and a high demand for (foreign) highly skilled workers. As scarcity grows in the private rental sector, PBSA and Co-Living will increasingly become a student or highly skilled worker’s last resort.
3. Impact strategies: Residential investment volumes in the Dutch private rental sector have witnessed a significant drop in 2023, challenging traditional investment strategies. Regulatory changes and higher interest rates are reshaping investor behaviour. Although some investors are (temporarily) withdrawing, others are shifting to alternative strategies such as leasing out - which raises total return or to impact strategies, accepting lower financial returns but creating a more positive social and environmental impact.

Raymond Frederiks, Market Intelligence Analyst at Savills in the Netherlands, says:  "The findings reveal a pivotal moment in the Dutch real estate market. The scarcity in the private rental sector, municipal regulation and shifting investment strategies are reshaping the industry. The PBSA and Co-Living sectors will only grow in importance, addressing unique housing needs of a growing target group. Despite challenges, the Dutch real estate market offers opportunities for long-term investors, especially those adopting impact strategies. The landscape is evolving, with a greater focus on sustainability and social impact."

Read the full report here.