GRIEuropean residential - Is a housing crisis looming?
As demand for homes in European cities fast outstrips supply, investors are showing a keen interest in build-to-rent.
December 3, 2018Real Estate
Europe faces a housing crisis, as demand from ever-growing urban populations and fragmenting households fast outstrips supply. That is the fundamental reality of the residential real estate sector in Europe, according to data compiled by Aberdeen Standard Investments and drawing upon sources including MSCI, the United Nations and Oxford Economics. Nordic cities stand out most starkly: the projected population growth of Oslo from 2015 to 2035 is the highest amongst European cities at 29%, followed by Stockholm at 25%, although the residential housing shortage remains true across all cities in Europe. Furthermore, home ownership in Europe has become unaffordable for most millennials - or indeed anyone that lacks a sufficient-size deposit.
To kick off GRI Residential Europe 2018, and to consider the question of whether build-to-rent residential projects might be the way to build the homes that Europe needs - and the homes which Europeans can afford - Andrew Allen, global head of Investment Research at Aberdeen Standard Investments, led a plenary discussion panel comprising also Kirk Lindstrom, CIO of Round Hill Capital, Horst Lieder, chairman of International Campus Group, Tim Mitchell, global head of Real Estate at GSA Group, and Jay Kwan, managing director of QuadReal.
The prevailing view, amongst panellists and audience alike, was that the case for investing in residential assets is well made. But right now, in Europe, institutional investor allocations to residential housing remain limited. Although the Netherlands leads the world with over 50% of the country’s residential assets being owned by institutions, and while US and Japanese institutional investors also have healthy allocations to residential real estate at around 25% and 15% respectively, few other countries have institutional allocations to residential real estate above 10%.
It seems though, that institutions are beginning to catch on, with allocations to residential rising just as fast as allocations to retail fall. The asset class has yet to be scaled up, optimised in terms of service and operations, and institutionalised, before it can really take off. But more than once, across discussions at GRI Residential Europe focused on each European geography, build-to-rent was likened to the student housing sector of eight to ten years ago, when financing was difficult to obtain and when institutional investors were shy. On that line of argument, build-to-rent is going to get there, eventually.
To kick off GRI Residential Europe 2018, and to consider the question of whether build-to-rent residential projects might be the way to build the homes that Europe needs - and the homes which Europeans can afford - Andrew Allen, global head of Investment Research at Aberdeen Standard Investments, led a plenary discussion panel comprising also Kirk Lindstrom, CIO of Round Hill Capital, Horst Lieder, chairman of International Campus Group, Tim Mitchell, global head of Real Estate at GSA Group, and Jay Kwan, managing director of QuadReal.
The prevailing view, amongst panellists and audience alike, was that the case for investing in residential assets is well made. But right now, in Europe, institutional investor allocations to residential housing remain limited. Although the Netherlands leads the world with over 50% of the country’s residential assets being owned by institutions, and while US and Japanese institutional investors also have healthy allocations to residential real estate at around 25% and 15% respectively, few other countries have institutional allocations to residential real estate above 10%.
It seems though, that institutions are beginning to catch on, with allocations to residential rising just as fast as allocations to retail fall. The asset class has yet to be scaled up, optimised in terms of service and operations, and institutionalised, before it can really take off. But more than once, across discussions at GRI Residential Europe focused on each European geography, build-to-rent was likened to the student housing sector of eight to ten years ago, when financing was difficult to obtain and when institutional investors were shy. On that line of argument, build-to-rent is going to get there, eventually.