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16 March 2017
With the majority of votes counted in the Dutch election and reports that a coalition government is likely to be formed, M&G Real Estate, one of the world’s largest property investors, predicts positive prospects for Dutch real estate.
The Dutch election marks the start of a busy and important year in European politics and follows the UK’s EU Referendum, the Italian referendum and Donald Trump’s victory in the US.
However, the economic outlook for the fifth-largest economy in Europe remains one of relative health. GDP is expected to reach 2% in 2017 (according to Consensus Forecasts), remaining well above the Eurozone average of 1.6%, while an unemployment rate of 5.3%, currently remains one of the lowest in Europe.
Dutch manufacturing output has also gathered pace in recent months, boosted by increasing export orders. Given that Dutch exports account for a third of its GDP, this news is particularly welcome. With 75% of these goods destined for EU markets, maintaining a strong trading relationship with Europe is equally paramount.
Positive prospects for Dutch real estate
M&G Real Estate believes that the country’s strong economic prospects have added to its appeal, and real estate investors remain undeterred by any political headwinds.
It notes that investment volumes reached €13.5 billion in 2016 (according to CBRE), a record high and up 11% on 2007. The weight of capital flowing into the market helped to compress prime office yields in Amsterdam by 50bps over Q4 2016.
However, even with this latest shift, M&G Real Estate believes that the spreads above 10-year government bonds remain particularly attractive, with investors now offered a significant premium of up to 360bps for prime offices in Amsterdam.
M&G Real Estate forecasts that this should be sufficient to deal with any further outward shift in bond yields resulting from any political headwinds, whilst the extension of the European Central Bank’s quantitative easing programme to the end of 2017 should help to suppress bond yields in the short term.
It believes that significant repricing of Dutch core property yields is unlikely and that investors should not be dissuaded from allocating capital to real estate in the Netherlands.
Tony Brown, Chief Investment Officer at M&G Real Estate, said: “As long-term real estate investors, we remain particularly positive about the Dutch market and do not expect the election to alter this position.
“Amsterdam continues to be one of the most liquid markets in Europe, benefiting from a supply-constrained central business district and stable office employment growth.
“We equally expect to see further opportunities in the logistics market, which remains one of the most mature in Europe. The country’s well-developed infrastructure and strategic geographical position make it well placed to service the core consumer markets in Europe.”
As long-term real estate investors, we remain particularly positive about the Dutch market and do not expect the election to alter this position.
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Notes to Editors
About M&G Real Estate
M&G Real Estate is the real estate fund management arm of M&G and is one of the top 25 real estate fund managers in the world by assets under management, with over £26 billion invested in a broad spread of properties across Europe, North America and the Asia Pacific region (as of 30 December 2016). M&G Real Estate has a sector leading approach to responsible property management, and is committed to assessing and improving the sustainability performance of funds under management.
M&G is the investment arm of Prudential Plc in the UK, Europe and Asia. For more information please visit www.mandg.com/realestate
M&G is an international active asset manager, investing on behalf of individuals and institutions for over 80 years. As of 30 June 2016 the firm manages over £255 billion of assets through a wide range of investment strategies across equities, bonds, property and multi asset.
This press release reflects the authors’ present opinions reflecting current market conditions; are subject to change without notice; and involve a number of assumptions which may not prove valid. It has been written for informational purposes only and should not be considered as investment advice or as a recommendation of any particular security, strategy or investment product. Past performance is not a guide to future performance.
The services and products provided by M&G Investment Management Limited are available only to investors who come within the category of the Professional Client as defined in the Financial Conduct Authority’s Handbook. They are not available to individual investors, who should not rely on this communication. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although M&G does not accept liability for the accuracy of the contents.
M&G Real Estate is a business name of M&G Investment Management Limited and is used by other companies within the Prudential Group. M&G Investment Management Limited is registered in England and Wales under number 936683 with its registered office at Laurence Pountney Hill, London EC4R OHH. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. M&G Real Estate Limited is registered in England and Wales under number 3852763 with its registered office at Laurence Pountney Hill, London EC4R 0HH.