"THE RESIDENTIAL MARKET IN EUROPE"
ALEXIS POURCELOT, RESEARCH INTERNATIONAL MADRID, FEBRUARY 2021
Classification : Internal
ECONOMIC CONTEXT
ECONOMIC CONTEXT G D P
P R E - P A N D E M I C
L E V E L S
S H O U L D
GDP growth
B E
R E A C H E D
A T
T H E
H A L F
O F
2 0 2 2
Inflation in Europe
10
6 5
5
4 3 %
%
0
-5
2 1
-10 0 -15
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Euro Zone Sources: Moody’s
France
Germany
Italy
Spain
United Kingdom
-1 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Euro Zone
France
Germany
Italy
Spain
United Kingdom
Sources: Moody’s
•
The Eurozone economy is bouncing back. GDP is recovering faster from losses accumulated during the pandemic period. The lifting of health restrictions and the accelerating vaccination campaigns improved economic activity in the manufacturing and services sectors. Barring a new wave of Delta or new variants emerging, GDP should reach pre-pandemic levels at the half year of 2022.
•
The policy-mix across European countries is supporting the rapid recovery of the economy. Monetary policy will remain accommodative in the Eurozone as the European central bank will leave main interest rates unchanged until the end of the year, but will progressively slow the pace of the bond purchase program and end its pandemic emergency purchase program at the end of march 2022. Fiscal policy in the Eurozone is still active and will benefit from the Next Generation EU program of 900 billion euros to boost the economy.
•
The rebound in global demand after several months of partial activity, and the disruption of the supply-chain triggered a rebound in consumer prices. Rebound in inflation in the Euro area i.e. +2.4% on a rolling year basis, is coming from various sources including energy accounting for half of inflation in Europe, some commodities and selected goods. Moreover, core inflation gradually increased over 2021. Inflation should persist over 2022 reaching +3.5%, on a rolling year basis, as consequence of bottle necks before fading in 2023.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
3
Classification : Internal
ECONOMIC CONTEXT E C O N O M I C
C O N F I D E N C E
A D J U S T E D
A S
C O N S E Q U E N C E
Economic sentiment
O F
I N F L A T I O N
S U R G E
Unemployment rate 30
120
25
110
20
100
15
%
130
90
10
80
5
19 21 24
0
70
Spain
Italy
France
Euro Zone
Germany
United Kingdom
60 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Euro Area Sources: Moody’s
France
Germany
Italy
Spain
UK Sources: Moody’s
•
The lifting of health restrictions from the accelerating vaccination campaigns are reducing uncertainty and boosting economic confidence. Sentiment across the Eurozone reached 113,8 points in Q4 2021. Indeed, the “whatever it takes” philosophy from the ECB and governments to rescue the economy and save jobs is fundamental to confidence. Nevertheless, spike in inflation and expectation about hike in interest rates contributed to degrade economic sentiment in Q4 2021.
•
Despite a new wave in Covid-19 cases in Q4 2021, inflation, hike in interest rate, and supply-chain disruption are the main concerns that could negatively impact the economic sentiment in the coming months.
•
The unemployment rate in the Euro zone peaked in 2020 due to health restrictions and remained stable in 2021. Nevertheless, the ease in health restriction, economic recovery and inflation should uplift employment in the short-term while the Next Generation EU program should uplift employment in the long term if countries are able to engage in formation, training programs to enhance employment transition. As results, we expect unemployment rate to gradually decrease by 2024. Unemployment rate in the Euro area should reach it lowest level by 2024.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
4
Classification : Internal
FINANCING MARKET E C B
P O L I C Y
I S
S T I L L
M A I N T A I N I N G
M O R T G A G E
Mortgage rates
R A T E S
A T
T H E I R
L O W E S T
L E V E L
Mortgage rates
7% 6,0% 6% 5,0%
5,0% 4,4%
5% 4,0%
Euro Area
France
Sources: European Central Bank
Germany
Italy
Spain
20
21 UK
Latvia
UK
0,8%0,8%
Finland
19
0,9%
Portugal
18
France
17
1,1%
Slovakia
16
1,3%1,3% 1,2%
Austria
15
1,5% 1,4%1,4% 1,4%
Euro Area
14
Sweden
13
Slovenia
12
Estonia
11
Cyprus
10
Lithuania
09
Denmark
08
Bulgaria
07
Ireland
0%
Norway
0,0%
Hungary
1%
Czech Republic
1,0%
1,7% 1,7% 1,6%
Poland
2%
1,9%
Germany
2,1%2,1%
2,0%
Luxembourg
2,3% 2,2%
Italy
2,5%
Spain
2,6%
Netherlands
3%
2,8% 2,7% 2,7%
Belgium
2,9%
3,0%
Malta
4%
Sources: European Central Bank
•
By setting the refinancing rate at 0.00%, ECB monetary policy resulted in the key interest rate of the European interbank, the 12-month Euribor, going into negative territory since the end of 2015; it is currently at -0.50% (end of Q4 2021).
•
The Eurozone economic recovery of +5.2% for 2021 along with a rebound in inflation (+2.6% in average in 2021) has potential to push the interest rate up. 10 year government bond in the Euro Zone increased by +35bps since the end of 2020 standing at +0.14% at the end of Q4 2021 as investors anticipate Central Bank moves to tighten policy. The European Central Bank will end up its pandemic emergency purchase program by march 2022 but decided not to increase key interest rate by the end of 2022.
•
Mortgage rates in the Euro zone remain stable at historically low levels of 1.31% in Q4 2021. Germany, Austria, France, Slovakia, Portugal and Finland provide the lowest mortgage rate of the Euro zone in a range of 0.8% and 1.3%.
•
In Q4 2021, loan supply standards slightly tighten due to lower risk tolerance from banks. Moreover, loan demand decreased in Q4 2021 after skyrocketed in Q2 2021. Tightening in credit conditions also contributed to reduce credit demand.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
5
Classification : Internal
CREDIT PRODUCTION IN EUROPE C R E D I T
I N
E U R O P E
R E A C H E S
I T S
H I G H E S T
H I S T O R I C A L
L E V E L
Credit production
EUROPE
+7.4%
700
Q4 2021 vs Q4 2020 Euro Area
600
Austria
Belgium
Estonia
Finland
France
•
Since Q4 2021 and on a rolling year basis, more than thousands billion euros have been granted in credit in the Euro zone. It reached an all time high in Q4 2021 with 1,047bn€ granted i.e. +7.4% compared to last year.
•
In Q4 2021 and on a rolling year basis, most European countries recorded a positive trend in lending except Austria, Croatia, Finland and Latvia where credit volumes decreased.
•
In Q4 2021 and on a rolling year basis credit volumes increased by +5% in Italy, Germany and Netherlands, by +8% in France, +35% in Spain and Portugal and +84% in UK (due to stamp duty holiday introduced in Q2 2020).
•
Since 2010, credit production twofold in the Euro area, Slovenia, more than twofold in Belgium and Lithuania, nearly threefold in Netherlands, and France and more than threefold in Austria, Estonia and Slovakia.
500
400 Germany
Ireland
Italy
Latvia
300
200
Lithuania
Netherlands
Portugal
Slovakia
100
Slovenia
Spain
0 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: European Central Bank
E U R O P E A N
R E S I D E N T I A L
R E P O R T
6
Classification : Internal
EUROPEAN RESIDENTIAL MARKETS
HOUSING TYPE IN EUROPE EUROPE 2020
100,0
53% of houses
90,0 80,0 70,0
• The housing stock in Europe is rather balanced between flats and houses (46,2% vs 52.9% respectively).
60,0
50,0
• We observe a smooth densification trend across Europe with more apartments built than houses since 2010.
40,0 30,0
• Nevertheless, there is a strong heterogeneity across Europe with countries such as Latvia, Spain, Switzerland and Estonia where flats represent more than 60% of the housing stock.
20,0 10,0 0,0
• Housing stock in Benelux, Balkan and Nordic countries as well as the United-Kingdom are mostly dominated by houses (i.e >60% of the housing stock). Source: Eurostat
Flats
Houses
E U R O P E A N
R E S I D E N T I A L
R E P O R T
8
Classification : Internal
HOUSING TENURE IN EUROPE T H E
P R I V A T E
S E C T O R
D O M I N A T E S
T H E
R E N T A L
M A R K E T EUROPE 2020
70
30.3% of tenants +100bps vs 2010
60
• The tenancy rate in Europe slightly increased over the last 10 years to reach 30.3% in 2020. Moreover, the private rental market is growing while the public rental market is on the decline.
50
%
40
30
• Historically, Southern and Eastern Europe has a high ownership rate. Nevertheless, even if mortgage rate drastically declined over last years, the subprime and sovereign debt crisis triggered a shift in economic activity and employment that weaken households employment status and financial conditions.
20
10
0
Private rental market (2020)
Public rental market (2020)
Global tenancy rate (2010)
European Union tenancy rate (2020)
• Hence, the private rental sector has grown significantly over the past 10 years and will keep growing with the need of flexibility and mobility.
Source: Eurostat
E U R O P E A N
R E S I D E N T I A L
R E P O R T
9
Classification : Internal
TRANSACTION VOLUME IN EUROPE S O A R
I N
T R A N S A C T I O N
V O L U M E
A F T E R
A
Y E A R
O F
A D J U S T M E N T
Transaction volume
EUROPE
220
+16%
Portugal Denmark
200
Q3 2021 vs Q3 2020
ICELAND
(12 countries)
Spain France
180
+6.2%
Index 2015Q1=100
Italy
160
+3.0%
NORWAY
SWEDEN
DENMARK
Estonia Belgium
IRELAND
UNITED KINGDOM
Transactions bounced back after the lockdown period and have overtaken their pre-crisis level in most countries excluding Ireland, Malta and Slovenia that are still recovering from the Covid crisis.
•
In Q3 2021 and on a rolling year basis, transaction volume increased by +32% in Spain, +28% in United Kingdom, +20.2% in France, +18.4% in Portugal, +17.8% in Denmark, +16.8% in Ireland and +16.6% benefitting from low interest rates, and homeworking opportunity.
•
Since 2015, transaction volume more than doubled in Portugal, rose by +80% in Denmark and +60% in France, Spain, Italy and Netherlands.
+10%
NETHERLANDS
+24% Ireland
+2.0% BELGIUM
+24%
Norway
100
•
+17%
Slovenia
120
Housing transaction volume soared by +16% in Q3 2021 and on a rolling year basis.
ESTONIA
Netherlands
140
• -12%
HUNGARY
UK
-17%
FRANCE
80
Sweden
+17%
+25%
Hungary 60 2015
2016
2017
2018
2019
2020
2021
ITALY PORTUGAL
+18% >+5%
0% - -5%
0% - +5%
<-5%
Sources: Eurostat, National statistics offices, BNPPRE
+31% SPAIN
* Data for Italy, Estonia and Hungary are 1 or 2 quarters late
E U R O P E A N
R E S I D E N T I A L
R E P O R T
10
Classification : Internal
RESIDENTIAL PRICE GROWTH IN EUROPE H O U S E
P R I C E S
A R E
S K Y R O C K E T I N G
Residential price growth
EUROPE
200
+9.2%
Sweden Germany
180
Q3 2021 vs Q3 2020
ICELAND
FINLAND
+14%
+4.4%
Portugal
+14%
NORWAY
Index 2010Q1=100
160
UK
+9.8%
+21% LATVIA
Netherlands
UNITED KINGDOM
+10%
•
Since 2010, house prices increased by more than 90% in Sweden and Germany, around +60% in Portugal, +50% in United Kingdom, Poland and Netherlands, around +35% in Ireland and the Euro zone.
•
Cyprus, Spain, Italy and Ireland have not fully restored value from the Great Financial Crash remaining between -10% and -15% below to the pre-GFC level.
•
Due to teleworking opportunity, housing demand shifted indicating preference for larger and more recent dwellings close to natural amenities in the outskirts of metropolises with very well transportation infrastructure.
•
The negative real interest rate and inflation environment are fueling investment decisions.
+16%
DENMARK IRELAND
House prices in Europe are skyrocketing, growing at an annual rate of +9.2%.
ESTONIA
SWEDEN
Poland 140
•
LITHUANIA
+20%
+13% 120
Ireland
POLAND
NETHERLANDS
+6.5%
+17%
+8.8% GERMANY
France 100
BELGIUM
Finland
+12%
+8.2%
60
+7.4%
+9.9% 0% - +5%
<-5%
HUNGARY
+13%
ROMANIA
+7.0% +4.2%
BULGARIA
ITALY PORTUGAL
0% - -5%
+10%
+8.8%
Euro Area
>+5%
+22% +14%
FRANCE
Italy
SLOVAKIA
AUSTRIA
Spain
80
CZECH REP.
+4.3% SPAIN
TURKEY
+34%
Sources: Eurostat, National statistics offices, BNPPRE
E U R O P E A N
R E S I D E N T I A L
R E P O R T
11
Classification : Internal
RESIDENTIAL RENT GROWTH IN EUROPE R E N T S ,
O N
T H E
R I S E ,
A R E
S H O W I N G
R E S I L I E N C E EUROPE
Residential rent growth
+1.1% +1.3%
190 Ireland ICELAND
180 Netherlands 170
+2.6%
+0.7%
Poland
160
+1.4%
NORWAY
+1.3%
Spain Finland
Index 2010Q1 = 100
140
+1.3%
UNITED KINGDOM
•
LITHUANIA
+1.8%
UK
+5.8%
POLAND
NETHERLANDS
+9.3%
+6.3% GERMANY
Sweden BELGIUM
120 Germany
+1.3%
+2.2%
CZECH REP.
SLOVAKIA
+3.9%
+1.0%
AUSTRIA
110
-2.0%
Euro Area
+1.6%
France
HUNGARY
+5.2%
ROMANIA
+3.1% +0.2%
• BULGARIA
+2.3%
90
Italy
ITALY PORTUGAL
+2.0% >+2%
0% - -2%
0% - +2%
<-2%
-4.1%
6 years rents rose by more than
Between 2010 and 2021 housing rents +40% in Spain Ireland,speeds, between increased at and different 10% an 30% for We Italy, Germany, outperforming inflation. registered a Finland, and around Unitedrent growth ofSweden +80% in Ireland, +40% in Rents Spain, Polandremained and Kingdom. in France Netherlands around +25% in Finland, rather steady over the period. Portugal United-Kingdom and Sweden. Rents in France and Italy remained • contained Many seasonal furbished housing over the period respectively have been put in long zone term and rental +12% and +7%. In the the Euro market as of the Germany, rentsconsequence increased over inflation (+16%). Covid-19 crisis creating a surge in
+11%
130
100
+3.0%
DENMARK IRELAND
Portugal
+11%
Between 2015 and 2021 •• Residential rental values in the housing Euro zone hits new record with +1.1% rents increased at different speeds increases in Q4 2021 vs Q4Over 2020. the last outperforming inflation.
ESTONIA
SWEDEN
LATVIA
150
Q4 Q2 2021 2021 vs vs Q4 Q2 2020 2020
FINLAND
TURKEY
SPAIN
Sources: Eurostat, National statistics offices, BNPPRE
E U R O P E A N
the rental supply driving rents down.
Much housing been put in in This seasonal phenomena is has even greater the long-term rental market as the Southern Europe such as Spain consequence of the Covid-19 crisis, and Italy. creating a surge in the rental supply and containing rents. This phenomena • is Moreover, theinrise in housing rents even greater the Southern Europe such as Spain, Italy and France incentivized many politicalthat to host a lot ofthe foreigners. However, we implement rent regulation. observe a consolidation of rents and the rental market is bouncing back due to high demand trying to benefit from the adjustment in rents.
R E S I D E N T I A L
R E P O R T
12
Classification : Internal
R E S I D E N T I A L AV E R A G E G R O S S Y I E L D S Y I E L D S
C O M P R E S S I O N
C A R R I E S
O N EUROPE
Average gross yields
5.6%
10%
-40bps
Finland ICELAND
9%
Q3 2021 vs Q3 2020 (12 countries) •• Favorable financing and Between 2015 andconditions 2021 housing good housing dynamics across Europe rents increased at different speeds triggered a compression of residential outperforming inflation. Over the last yields (i.e. -40 bps vs Q3 2020). 6 years rents rose by more than +40% in Spain and trend Ireland, between • The historical upward of yields in Finland, is the result 10% anIreland 30%andforSpain Italy, Germany, of a dynamic rental market a Finland, Sweden and and Unitedsharper riseRents in rental capital Kingdom. in values Francevsremained value. rather steady over the period.
FINLAND
Ireland
8.3% Spain
5.8%
Italy 7%
Portugal Netherlands
6%
2.2%
NORWAY
8%
SWEDEN
DENMARK IRELAND
UNITED KINGDOM
8.1% Norway
5%
NETHERLANDS
4.5%
6.1%
•
GERMANY
France BELGIUM
3.2%
UK
4%
AUSTRIA
Germany
2.6%
FRANCE
3%
Austria
5.2%
Sweden
2%
6.4% >7%
3% - 5%
5% - 7%
<3%
Sources: Eurostat, National statistics offices, BNPPRE
7.7% ITALY
PORTUGAL
Yields reach their lowest level in
• Portugal, Many seasonal furbished housing Netherlands, Norway, France, have been put in the long term and rental United-Kingdom, Germany Austria Sweden. market as consequence of the Covid-19 crisis creating a surge in • The low volatility compared to other the rental supply driving rents down. assets and the resilience of the This phenomena even greater residential sector isis fueling investor in the Southern Europe such Spain appetite. Furthermore, the realas estate and Italy. yields convergence and the low level of European bonds tends to increase the competitiveness residential.rents • relative Moreover, the rise inof housing
7.4% SPAIN
•
Sources: Eurostat, National statistics offices, BNPPRE
E U R O P E A N
incentivized
many
political
The lack of existing assets pushes implement the rent regulation. investors to create long-term partnership with developers to invest in Build-to-Rent product to satisfy demand.
R E S I D E N T I A L
R E P O R T
to
13
Classification : Internal
P R I C E T O I N C O M E R AT I O I N E U R O P E R I S E I N P R I C E S
P R I C E
T O
I N C O M E
R A T I O
D U E
T O
T H E
S U R G E
I N
H O U S E EUROPE
Less affordable housing markets
Most affordable housing markets
9 years
20
Q3 2021 18
17,6
2021-Q3
16,9
10 years average
•
The Price-to-income ratio shows the affordability of the housing market in number of years of household income.
•
In Q3 2021, households spend around 9 years of their income to afford a 70sqm dwelling. This is a 9 months increases compared to 10 years average.
•
The Price-to-income ratio increased in 20 countries out of 24 compared to its 10 years average. The most important increase occurred in Portugal, Bulgaria and Austria.
•
It shows that house prices increased faster than households income reducing affordability and increasing the probability of overvalued market compared to fundamentals.
•
When buying housing, the most affordable markets in Europe relative to household income are France, Spain, Italy, Ireland, Norway, Finland and Latvia.
16 14,3
14,2
14
13,9 12,5
12
11,5 11,0 10,4
10
9,6
9,5
9,5
9,4
9,3
9,1
9,0
8,9 8,1
8
7,1
7,0
6,6 6,0
6
5,8
4
2
0
Sources: Eurostat, Moody’s, BNPPRE
E U R O P E A N
R E S I D E N T I A L
R E P O R T
14
Classification : Internal
AFFORDABILITY INDEX M A R K E T S
A R E
G L O B A L L Y
F A I R L Y
V A L U E D ,
Housing purchasing power
S U P P O R T E D
B Y
H I G H
L E V E L
O F
A F F O R D A B I L I T Y
Affordability ratio
80
50% 72
45% Loose
40%
70
Tight 60
57
30%
54
sqm
50 50
46
44
20% 43
41
40 30
40
37
10% 33
32
31
30
29 25
24
19% 14%
11%
9%
6%
4% 10 year equilibrium value
0% 0%
20
-10%
10
-20%
0
-30%
Sources: Eurostat, National statistics offices, BNPPRE
Sources: Eurostat, National statistics offices, BNPPRE
-1%
-3% -7%
-7%
-9%
-12% -14% -16% -21%
•
The affordability index is a complete indicator that takes into account several effects such as the change in mortgage rates, household income and house prices. It enables to compute the number of square meter a household can purchase earning a local median income, borrowing money over 20 years at the local mortgage rate, for a local average price per square meter.
•
In Q3 2021, households in Finland, Italy Norway and Spain can purchase dwellings of 50 sqm or more. In France, Germany, Slovenia, Netherlands and Denmark the purchasable surface is in a range of 40 sqm and 50 sqm while in Portugal, Czech Republic, Slovakia and Poland, households can afford a maximum of 30 sqm.
•
Compared to last year, housing purchasing power dropped almost everywhere excluding Romania and Spain where it increases. The most important dropped happened in Austria (-6.5 sqm), Latvia (-6.3 sqm), Czech Republic (-4.8 sqm), Germany (-4.2sqm), Denmark (-3.9 sqm) and Netherland (-3.2 sqm).
•
Finally, most European housing markets seem particularly balanced or undervalued and are still facing potential growth in house prices. However, some markets show signs of overvaluation such as Austria, Czech Republic, Germany and Portugal where housing purchasing power is well under the 10 year equilibrium value.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
15
Classification : Internal
BUY-VS-RENT ANALYSIS
P R I C E T O R E N T R AT I O I N E U R O P E P R I C E S
C O N T I N U E
T O
I N C R E A S E
F A S T E R
T H A N
R E N T S EUROPE
Better to rent 50
Better to buy
+5.9%
49,1
Q3 2021 vs Q3 2020 (11 countries) 44,5
45
2021-Q3
10 years average
•
Over the last year, the Price-to-Rent ratio increased by +5.9% on average across 11 countries.
•
Compared to the 10 years average, the Price-to-Rent ratio increased almost everywhere, except in Italy and Finland, where it slightly decreased. Sweden, Austria and Germany recorded the highest increase in the Price-to-rent ratio.
•
The high growth in house prices vs rents suggests that the rental market is becoming more and more affordable compared to buying. Yields compression also suggests that rents should increase in countries where it becomes more affordable to rent in order to rebalance the investment profitability.
•
In Q3 2021, the Price-to-Rent ratio is favorable to the rental market for all countries where the ratio is above 20 such as Sweden, Austria, Germany, United Kingdom and France.
•
However, this indicator is incomplete because it doesn’t take into account the borrowing capacity through the financing market.
40
35
33,0
30
25
23,5 20,1
20
18,2
17,3
17,2
16,1
15,4
15
13,1
10
5
0 Sweden
Austria
Germany
UK
France
Norway
Portugal
Netherlands
Ireland
Spain
Italy
Sources: Eurostat, National statistics offices, BNPPRE
E U R O P E A N
R E S I D E N T I A L
R E P O R T
17
Classification : Internal
B U Y- V S - R E N T I N E U R O P E A U S T R I A , G E R M A N Y , M A R K E T D E P T H
N O R W A Y ,
A N D
F R A N C E
H A V E
H I G H E R
R E N T A L
Buy vs rent ratio 2,5
2,3
2,0
1,8
1,5 1,1
•
The buy vs rent ratio is the ratio between the monthly mortgage repayment and the monthly rental value for the same surface. It gives an indication of market tension. The higher the ratio, the greater the cost of buying vs renting for a same surface.
•
The ratio shows that it is better to buy than renting in Netherlands, Portugal, Spain, Italy and Finland. Indeed, households would gain +25sqm in Finland, +14sqm in Italy, +11sqm in Spain, +4sqm in Portugal and +2sqm in Netherlands when buying rather than renting a dwelling.
•
However, it is the opposite in Austria, Germany, Norway and France where it is cheaper for households to rent rather than to buy a dwelling. Moreover, households would afford +4sqm in France, +6sqm in Norway, +34sqm in Germany and up to +47sqm in Austria when renting rather buying a dwelling.
1,1 0,9
1,0
0,8
0,8
0,7
0,6
0,5 0,0
Austria
Germany
Norway
France
Netherlands
Portugal
Spain
Italy
Finland
Difference in surface between buying and renting in Europe 30
25 14
20
11 4
10
2
0 -4
-10
-6
-20 -30 -34
-40 -50
-47
-60 Finland
Italy
Spain
Portugal
Netherlands
France
Norway
Germany
Austria
Sources: Eurostat, National statistics offices, BNPPRE
E U R O P E A N
R E S I D E N T I A L
R E P O R T
18
Classification : Internal
NEED FOR AFFORDABLE HOUSING
HOUSING COST BURDEN S H A R E M O R E
O F
T H E
T H A N
P O P U L A T I O N
4 0 %
O F
T H E I R
S P E N D I N G
I N C O M E
I N
H O U S I N G
EUROPE 2020
2020 vs 2010
12.3%
2020
GERMANY
+600bps
UNITED
-160 bps
< 5%
FINLAND
5% - 10% KINGDOM
FRANCE
NORWAY
10% - 15%
+120bps
ESTONIA
SWEDEN
> 15%
• Housing cost burden is a specific indicator of the share of the population that spends more than 40% of their disposable income on accommodation.
LATVIA
NETHERLANDS
-390bps
ITALY
+160bps
SPAIN
-100bps
DENMARK
IRELAND
LITHUANIA
UNITED KINGDOM NETHERLANDS
• Over the last 10 years, the housing cost burden in Europe rose by +70bps.
POLAND GERMANY
POLAND
-610bps
IRELAND
+10bps
CZECH REP.
BELGIUM
+90bps
AUSTRIA
BELGIUM
FRANCE
CZECH
REPUBLIC
LUXEMBOURG
HUNGARY
• Countries with a high share of ownership rate have a lower level of cost burden because many households are loan free. Likewise, countries with a high level of public rental market have a lower housing cost burden.
ROMANIA
-160bps BULGARIA
+560bps
ITALY PORTUGAL
SPAIN
TURKEY
Source: Eurostat
E U R O P E A N
R E S I D E N T I A L
R E P O R T
20
Classification : Internal
HOUSING COST ON DISPOSABLE INCOME A F F O R D A B L E H O U S I N G S O U T H E R N E U R O P E
N E E D E D
I N
W E S T E R N ,
N O R T H E R N
A N D EUROPE 2020
70
20% 60
50
• Accommodation takes 20% of household disposable income in Europe on average, having slightly decreased over the last 10 years (-150bps).
%
40
30
• In most countries, most vulnerable households spend more than a third of their income in housing excluding CEE countries, Latvia, Estonia, Lithuania, Ireland, Portugal, Cyprus and Malta.
20
10
• This statistic shows the need to develop affordable housing in Europe mostly in countries such as Greece, Denmark, Germany United-Kingdom, Netherlands, Sweden and Norway.
0
Total Source: Eurostat
Below 60% of median equivalised income
Above 60% of median equivalised income *2018 for Iceland and United Kingdom
E U R O P E A N
R E S I D E N T I A L
R E P O R T
21
Classification : Internal
CONSTRUCTION
HOUSING DEVELOPMENTS IN EUROPE R E B O U N D
I N
H O U S I N G
D E V E L O P M E N T
Housing development intensity
A F T E R
L O C K D O W N
P E R I O D S
Housing permits 800.000
20,6
700.000
20
600.000 500.000
15
400.000 10
8,3
7,0 6,6 6,3
300.000 6,2 5,6 5,5 5,5
5,2 5,1
5
4,5 4,3 4,2
3,7 3,0
0
200.000 2,7 2,3 2,2 2,0
1,6 1,4 1,0 1,0 100.000 0
Housing permits per 1,000 inhabitants
Numbers of dwellings (12 months cumulated)(rhs)
Sources: Eurostat, National statistics offices, Moody’s, BNPPRE
Numbers of dwellings (12 months cumulated)
Number of dwellings for 1,000 inhabitants
300 25
250 200 150 100 50
2010
2011
2012
Poland Czech Republic Belgium Spain
2013
2014
2015
2016
Sweden Austria Portugal Slovenia
2017
2018
2019
Ireland Finland France Italy
2020
2021
Germany Netherlands Euro Area
Sources: Eurostat
•
Housing development in the Euro zone has recovered from the lockdown periods of 2020 that froze the construction sector for several months. In Q3 2021, we observed a rebound in housing permits +15.9% compared to the same period last year. This rebound is a base effect compared to the drop in housing permits during lockdown in Q2 2020. Even though housing permits recovered from the health crisis and reach their pre-pandemic levels, we observe a ceiling level compared to previous quarters of 2021.
•
The highest absolute value of housing permits are recorded in Poland (787,700), France (468,700), Germany (372,184) and the United-Kingdom (372,196).
•
Nevertheless, the highest relative values - the housing development intensity per 1,000 inhabitants - are recorded in Poland (20.6), Finland (8.3), France (7.0) Austria (6.6) and Estonia (6.3) . The lowest intensities are registered in Bulgaria (1.0), Italy (1.0), Latvia (1.4), Hungary (1.6) and Slovenia (2.0).
•
We expect the construction sector to grow in the coming years supported by the Next Generation program from UE that support zero carbon and energy efficiency. However, the supply chain disruption, the increase in commodity prices affecting construction costs and the lack of labor force in the sector could challenge the growth in the sector.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
23
Classification : Internal
INVESTMENT MARKET
RESIDENTIAL INVESTMENT VOLUME EUROPE
2021 vs 2020
+60%
FINLAND
2021 vs 2020
1.9 NORWAY
+196%
GERMANY UNITED KINGDOM FRANCE
0.5
-58%
1.0
7.1 UNITED KINGDOM
11.2
+48%
NETHERLANDS
3.4
+16%
POLAND
+351%
DENMARK
+131%
SWEDEN
+58%
•
Residential investment in Europe is supported by strong levels of liquidity in the economy. Moreover, investment is encouraged by healthy fundamentals such as positive structural population growth, the need for affordable housing, and capital values that carry on keeping up upward.
FRANCE
•
Compared to other assets, we observe high levels of risk premium, far above the long term average. Likewise, yields convergence between office and residential yields stimulate the relative competitiveness of residential.
•
Finally, the residential asset is less risky than other real estate assets in terms of volatility and enables to dilute vacancy risk due to its multi-tenant profile. Nevertheless, the lack of product impulse the creation of partnerships between developers and investors for BTR assets.
0.7 CZECH REP.
0.1
0.1 BELGIUM
POLAND
GERMANY
53.0 SPAIN
Residential investment volume in Europe reaches 98Bn€ in 2021 i.e. +60% compared to last year.
8.0 IRELAND
ITALY
•
DENMARK
+11%
NETHERLANDS
SWEDEN
-2%
AUSTRIA
SWITZERLAND
1.7
1.0
6.3 ITALY
0.5
PORTUGAL
0.3 ≥ €10bn
€1-2bn
€5-10bn
< €1bn
SPAIN
2.4
€2-5bn Source: RCA, BNPPRE
E U R O P E A N
R E S I D E N T I A L
R E P O R T
25
Classification : Internal
RESIDENTIAL INVESTMENT MARKET IN EUROPE R E S I D E N T I A L
N E A R L Y
H I T S
T H E
3 0 %
O F
Share of each country in residential investment volume
T O T A L
I N V E S T M E N T
V O L U M E
I N
E U R O P E
Share of residential in total investment volume Germany
13%
70% United Kingdom
8% 5% 6%
5 year average 11%
7%
5% 2% 3%
33%
2021
54%
61% 60%
Sweden
50%
Netherlands
40%
Spain
8%
55% 48% 40% 34%
39%
30% 20% 14%
20%
France
22% 15% 15%
18% 18%
Denmark
9%
0%
15% 8%
Sources: RCA, BNPPRE
23%
36% 31% 26%
7%
10%
11%
26% 23%
33%
Rest of Europe
19 20 21
19 20 21
19 20 21
19 20 21
19 20 21
19 20 21
19 20 21
Sources: RCA, BNPPRE
•
In 2021, residential investment volume reaches 98 billion euros i.e. +60% compared to last year and represents nearly 30% of the total investment volume in Europe.
•
Residential in Germany represents 54% of the residential investment volume in Europe followed by United Kingdom (11%), Sweden (8%) and Denmark.(7%). In 2021, Germany and Denmark increased market share compared
•
In Denmark and Germany, residential accounts for 61% and 55% respectively of the total investment volume while in other countries it only accounts for 15%-20%. Residential exposure remain rather limited in France, Spain and United Kingdom compared to other assets classes. We expect an increase in residential exposure in the coming years in France, United Kingdom and Spain.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
26
Classification : Internal
RESIDENTIAL INVESTMENT VOLUME IN EUROPE EUROPE Rank
Metropolis
Volume
% change vs 5-year average
1
Berlin
30.5 bn€
+236%
2
London
4.4 bn€
+8%
3
Denmark –other
3.7 bn€
+126%
4
Stockholm
3.5 bn€
+70%
5
Copenhagen
2.7 bn€
+87%
6
Amsterdam
2.5 bn€
-23%
7
Hamburg
2.2 bn€
+103%
8
Sweden – other
1.8 bn€
+27%
9
Paris
1.7 bn€
+10%
10
Munich
1.5 bn €
+72%
•
The 10 first markets accounts for more than 55% of total residential investment volume in Europe.
•
Even though Berlin used to be ranked the first market in Europe to attract investment, this year the city experienced a +236% growth due to the takeover of Deutsche Wohnen SE by Vonovia and Akelius by Heimstaden. Furthermore, we record 40 transactions greater than 100M€.
•
Denmark markets also recorded strong growth driven by the takeover by Heimstaden of Akelius and the 1.3 billion euros portfolio from Niam acquired by Heimstaden.
•
The decrease in investment in Amsterdam can be explained, partially, by the change in transaction taxes.
Source: RCA, BNPPRE
E U R O P E A N
R E S I D E N T I A L
R E P O R T
27
Classification : Internal
RESIDENTIAL INVESTMENT BY SIZE BAND M O R E
A N D
L A R G E R
T R A N S A C T I O N S
Breakdown in volume
Breakdown by number 1% 2%
<5M€
9%
1% 2% 6% 35%
6%
5M€ - 10M€
4%
<5M€
11%
5M€ - 10M€
10% 11%
13%
10M€ - 20M€
16%
6%
12%
3%
13%
10M€ - 20M€
21%
5 year average
45%
2021
20M€ - 50M€ 16%
5 year average
2021
50M€ - 100M€
50M€ - 100M€ 29%
16%
26%
30%
100M€ - 200M€
15%
20M€ - 50M€
28%
100M€ - 200M€
18%
Sources: RCA, BNPPRE
>200M€
>200M€
Sources: RCA, BNPPRE
•
In 2021, we record a total of 1,710 deals vs 1,341 deals in 2020 i.e. +28%.
•
In 2021, transactions greater than 100M€ represent 60% of the residential investment volume i.e. +9 percentage points compared to the 5-year average. Furthermore, even though such transactions represent only 4% of total transactions on the market we observe a rise compared to the last 5 years. We record a total of 168 transactions greater than 100M€ in 2021 vs an average of 60 transactions the last 5 years.
•
Transactions between 10M€-20M€ and 20M€-50M€ represents 26% and 29% respectively of all transactions, declining slightly compared to the last 5 years. We record 440 deals for the segment 10M€-20M€ and 489 deals for the segment 20M€-50M€.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
28
Classification : Internal
BREAKDOWN OF INVESTMENT BY BUYER AND SELLER TYPE C O U P L E
O F
T A K E
O V E R
O F
P R O P E R T Y
C O M P A N I E S
Buyer typology
Seller typology Funds 5%
19%
15%
2%
Developer/Owner/Operator
Property Companies & REITs
20%
Developer/Owner/Operator
Insurance
21%
5 year average
10%
Property Companies & REITs 5%2%
Funds
2%
2%
39%
2021
Bank 49%
Insurance 32%
5 year average
Bank
2021
Corporates
Corporates
Public sector
Public sector
24% Private investor
41%
32% 22%
Sources: RCA, BNPPRE
49%
Private investor
Cooperative
Cooperative
Other
Other
Sources: RCA, BNPPRE
•
In 2021, Funds, Property Companies and Developer/Owner/Operator were the most active in the market. They represented 39%, 32% and 21% of the residential total investment volume respectively. Nevertheless, we observe that Property Companies and Developer/Owner/Operator tend to gain market share because they represent a larger share of the market in 2021 vs the last 5 years.
•
The top 5 buyers are Vonovia SE (26.5 billion €) with the takeover of Deutsche Wohnen, Heimstaden (12.9 billion €) with the takeover of Akelius, Axa (2.6 billion €) for its joint venture with In’li, Patrizia (2.4 billion €) with its PRS in Barcelona (800M€) and its Carossa Quarter (750M€) located in Berlin and finally Leg immobilien (1.7 billion €) with the Adler portfolio acquisition for 1.3 billion €.
•
In 2021, most important sellers are Property companies and Developer/Owner/Operator i.e. 49% and 32% respectively.
E U R O P E A N
R E S I D E N T I A L
R E P O R T
29
Classification : Internal
CROSS BORDER INVESTMENT IN EUROPE LESS AMERICAS
BUT
MORE ASIATIC
8%
INVESTORS
1%
•
In 2021, the residential investment market in Europe have been essentially driven by domestic and European investors. They represented 67% and 24% of the total residential investment volume i.e. +12pp compared to the 5year average.
•
In 2021, Americas represented 8% of the total residential investment volume vs 18.5% the last 5 years. The drop is explained by the stronger dynamic of housing markets in United States.
•
In 2021, Asia & Pacific investors increased the residential exposure in Europe. We observe a +70% increase in investment.
•
Inversely, American investors reduced investment by -16%.
24%
67%
DOMESTIC EUROPE AMERICAS ASIA & PACIFIC
MIDDLE EAST
E U R O P E A N
R E S I D E N T I A L
R E P O R T
30
Classification : Internal
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