Dutch real estate investments showed an improvement in Q1 2014 with a total return of 0.6 per cent compared with a -0.2 per cent return for Q4 2013, according to the IPD Netherlands Quarterly Property Index.
Although returns improved in the first quarter, compared with the other asset classes, the index underperformed.
The best performing asset in the first quarter, bonds, returned 5.1 per cent (JP Morgan 7-10 years), while property equities returned 1.8 per cent and equities 1.1 per cent (MSCI). Price inflation was 1.0 per cent.
Overall property values fell -0.8 per cent in the first quarter, still depreciating but less than the 1.4 per cent seen in Q4 2013. The quarterly income return was 1.4 per cent in Q1 compared to 1.3 per cent in Q4. For the whole market, vacancy rates have been stable in the last four quarters, but in the residential and office sectors the vacancy rate declined from 4.8 per cent in Q4 to 4.2 per cent in Q1 for residential and from 15.7 per cent to 13.7 per cent for offices.
Retail and industrial saw an increase in vacancy rates: 4.9 per cent for retail (4.6 per cent in Q4) and 22.4 per cent for industrial (18.2 per cent in Q4).
While the industrial sector (a relatively small sector in the Quarterly Property Index) showed a negative return of -0.7 per cent in Q1 2014, all other sectors returned positively, with residential and offices on 0.8 per cent. Retail, for a long time the best performing sector in the Dutch index, had a positive return of just 0.1 per cent.
Capital depreciation remains the reason for the relatively low property returns recorded in Q1, as all sectors showed negative capital growth. Industrial had the most negative capital return of -2.3 per cent in Q1, while retail’s capital growth of -1.4 per cent resulted in a total return close to zero. Offices had a capital growth of -1.0 per cent with residential at -0.4 per cent.
Lorenzo Dorigo, vice president and head of BeNeLux, IPD, says: “Although the index has slightly improved, the reality is that negative capital growth is still offsetting most of the income return. Let’s hope the market will now turn around, given that macro-economic indicators for the Netherlands are improving.”