Institutional investors continue to find attractive investment opportunities in the European residential property markets. This was revealed in a joint analysis presented by experts from several real estate companies during a webinar. The markets examined – Germany, the Netherlands, Denmark, Sweden and Spain – share a common characteristic despite differing regulatory frameworks: a structural demand surplus accompanied by an insufficient supply of housing. This constellation leads to rising rents and stable, positive return prospects in all countries.
The panellists identified insufficient new build activity as the biggest challenge in all markets studied. This exacerbates the existing structural supply deficit and thus contributes to the continued attractiveness of residential property as an asset class. Despite geopolitical uncertainties and short-term interest rate fluctuations, the residential property markets have so far remained largely resilient, underscoring the defensive characteristics of this asset class.
Regional Market Observations
Mikael Hjorth, Fund Director at CapMan, pointed to the situation in the Nordic markets, where new build activity has been significantly reduced since 2022 and does not meet the actual housing demand. This creates additional pressure on rent development. Residential property remains one of the most sought-after asset classes in Scandinavia, particularly in metropolitan regions where long-term growth prospects are observed. Robbert van Dijk, Fund Director at a.s.r. real assets, emphasised that the Dutch housing market benefits from consistently high demand from institutional investors. Rent development there is positive, primarily due to the high demand for affordable rental housing and limited new build activity, which offers stable return prospects for long-term oriented institutional investors.
Simon Lieb, Managing Director of KINGSTONE Residential Investments, explained the situation in Germany, where the demand for affordable housing remains constantly high. However, high construction costs, financing costs and regulatory requirements make the creation of new homes difficult. Subsidised and rent-controlled housing is therefore developing into an independent and increasingly attractive asset class for institutional investors. Fernando Ramírez De Haro, Head of Spain & Portugal at Savills Investment Management, noted that Spain is experiencing a significant demand surplus, as significantly more households are formed each year than homes are completed. Long-term investments by institutional investors could make an important contribution to alleviating the shortage here. According to him, attractive prospects are emerging not only in Madrid but especially in dynamic cities such as Valencia and Málaga.
Structural Dynamics and Outlook
All experts emphasised the structural nature of demand surpluses, which are accompanied by an inadequate supply of housing. This fundamental dynamic, exacerbated by demographic developments and urbanisation trends, ensures the relevance and attractiveness of residential property for institutional portfolios. The market's ability to generate rental increases underscores the value creation potential, even in a more challenging macroeconomic environment.
- —Markets observed: Germany, Netherlands, Denmark, Sweden, Spain.
- —Core agreement: Structural demand surplus meets insufficient supply.
- —Consequences: Rising rents and stable return prospects.
- —Main challenge: Insufficient new build activity in all regions considered.
