Brexit leaves Dutch property market simmering

By Anthony Deutsch

AMSTERDAM (Reuters) - Until the British vote to leave the European Union last month Dutch real estate prices were booming, lifted from the depths of the financial crisis in the last three to four years by a surge in foreign investors seeking better yields.

And although there has been no immediate impact on Dutch property prices, Britain's possible departure from the EU has excited speculation that Amsterdam could attract London-based businesses seeking to relocate to continental Europe.

Hitherto prices have been supported by a structural residential housing shortage, recovering office demand and, in recent months, stalled investment in London.

In May and June alone Dutch property deals worth nearly 2 billion euros ($2.2 billion) were struck with big, mostly foreign, private equity companies, according to data compiled by Reuters.

Investors have been piling into all property classes, the prices of which sank more deeply than in other European cities after the 2008 financial crisis, as normally conservative pension funds and other investors look further afield for yield at a time of rock-bottom interest rates.

The Netherlands, a significantly smaller market than Britain, Germany or France, has already attracted a higher percentage of foreign capital coming into its property market over the past three years, with foreign money accounting for 52 percent of property investments in 2015, up from 22 percent in 2012, real estate consultancy JLL said.

That compares with a relatively stable 40 percent share for foreign investors in German and French markets.

"There is a lot of buying by foreign players," Jaap Sellen, Dutch office fund manager at CBRE Global Investors, the real estate services and investment company, said. "They are hitting the whole market."

Dutch commercial real estate investment volumes increased 47 percent in the first four months of 2016 to 2.5 billion euros compared with the same period last year, Savills World Research said, noting that a small number of large deals had boosted the quarterly figure.

"That's very steep growth and very much supports the trend that demand is far outstripping supply of basically any investment proposition," said Jeroen Jansen, a researcher at the property services and consultancy group Savills (SVS.L).

WARNING SIGNS

Germany remains the top foreign investor, while British and American private equity buyers have really taken the Dutch market by storm, increasing their share from zero in the 2009-2011 period to 36 percent in 2014-2016, Jansen said.

Asian investors have also moved into the market.

Singapore-listed First Sponsor Group Limited, a property developer in China, said last November it was buying 16 Dutch offices for 206 million euros.

And in June, French asset manager Amundi (AMUN.PA) purchased the massive, riverfront "De Rotterdam" building in the port city for Korean investors for 375 million euros.

The Dutch property market was among the hardest hit during the financial crisis, having fallen 3 percent per year between 2008-2013, or nearly 20 percent. Prices have since risen for 11 consecutive quarters, with the strongest gain of 5.6 percent reported by the Dutch Association of Realtors (NVM) in the second quarter of this year.

Out of a dozen predominantly Western countries analysed by JLL, the Dutch property market carried the highest risk premium in 2013 and 2014 at more than 5 percent above benchmark 10-year government bond. In 2015, that slipped slightly to 5 percent, declining to 4.75 percent this year, JLL said.

"Amsterdam is not really cheap anymore after steep price rises," said Sven Bertens, head of research at JLL in the Netherlands. But "it is a market with a relatively low risk and a yield that is still attractive."

However, the speed of the recovery and price levels has some market players worried about overheating, with prime commercial properties selling for up to triple the price they were snapped up for at the tail end of the crisis.

Several private equity firms have already sold off portfolios, having bought in earlier.

"You have some clear signals that you must be careful in what you do," said Jaap Rhijn, who heads the Dutch operations of Colliers, the U.S.-based real estate services group.

"This is the moment that some private equity investors are selling."

(Editing by Greg Mahlich)