Lately you can't check the news anymore without reading something about skyrocketing inflation, the looming energy crisis and all their effects on the housing market. So many negative headlines with sometimes little context. Despite all of this we, at BRXS, are actually more optimistic than ever and are starting to see a lot more opportunities today compared to last year. We want to do it differently and give you the context that is too often missing and we want to share what is going on and how we see it with you more frequently.
What is happening:
The third quarter of 2022 showed an annual housing price increase of 2%, but did see a decline of 5.8% compared to the second quarter of 2022 (Source: NVM). So the higher interest rates, energy crisis and inflation are reducing demand for buying homes. In itself, not a bad thing that some "normalisation" is occurring, after the overheated housing market of the past 2 years.
What does the future hold:
Depending on how mortgage rates and purchasing power continue to evolve over the next few months, it is likely that the demand for housing will stabilise or slightly decline. The craziness of the last few years is most likely over. After all, under the current conditions, one can borrow less than before.
But to get the full picture, we also have to take into consideration the availability of homes. And this housing supply remains very limited in the Netherlands: there is still a current shortage of more than 300,000 homes. To close this shortage, the Ministry of the Interior is trying to raise the construction rate from 70,000 new homes to 100,000 new homes per year. Even if this is achieved (which will not be easy), the housing shortage will not be eliminated before 2030.
Bringing the supply and demand pictures together, the real estate experts of the Dutch banks have a mixed point of view: some are assuming a slight growth in home prices for 2023 (Rabobank at 3%) while others assume a slight decline (ABN Amro at -2.5%)
How does BRXS look at it:
First of all, the social aspect is very important to us. We founded BRXS to make real estate investing more accessible and we think it's important that everyone gets a fair chance in the housing market. So the fact that there is a bit of a cooling off in the housing market is a good thing for all of us.
Our starting principle is to not compete with first-time buyers and families looking for their homes. We focus specifically on existing rental properties and do not withdraw properties from the owner segment to the rental segment.
Within this rental property segment, we are actually getting more excited as we see a lot of opportunities emerging, aligned with our real estate investing strategy:
- Attractive segments- Not every rental property is a good investment, so you have to be picky and there are segments today that are underinvested and show strong potential. For example, segments with a very large shortage such as student housing: The situation is even so bad that most Dutch universities have advised foreign students to not come to the Netherlands this academic year ‘22-’23.
- Strong rental return- Real estate has the advantage of two seperate ways of earning: Rental income and Value appreciation. By investing in real estate with a strong and stable rental yield (4-7%), you ensure diversification. Even if the housing market is down for a few quarters, you still have your passive income and return on investment from rent.
- Current situation creates opportunities- Due to the current economic situation, a lot of investors are having to sell their investment properties. This creates a lot of good opportunities for those who can invest today. And we are experiencing this now on a daily basis: for the first time in so long, we are again seeing rental properties where there is future potential and where not all value has been squeezed out.
- Mortgage strategy- With the higher interest rates, it is not always interesting to take out a mortgage now. Hence we are looking for properties that also provide good returns without a mortgage. In the future when mortgage rates become interesting again, we can then take out a mortgage on those properties and create a strong upside for investors.
Our latest property in Delft is a good example of the above and we are working hard on bringing more such strong opportunities to the platform in the coming weeks. As always if you have any questions, thoughts or just want to say “Hi”, you can reply to this email.
Excited to be investing alongside you,
Filip
