PATRIZIA diffonde la sua visione nell’ ” European Residential Markets 2020/2021” . Ecco le conclusioni

PATRIZIA Insight into European Residential Markets 2020/2021 :

Living doesn’t stop because of a pandemic

The living sectors have maintained their reputation for resilience and stable operating cash flows throughout

the COVID-19 pandemic. For example, rent collection for multifamily housing has remained stable at

levels between 90% and 95%. However, future performance of the different residential categories will vary

significantly as the sector is not immune to the repercussions of the global pandemic. But knowing the rules

of the game and the (politically induced) changes it involves will remain a key success factor, especially in

these uncertain times.

Residential is an attractive bond substitute

Thanks to its superior cash flow characteristics and capital value preservation, diversified residential, in

Europe in particular, is an excellent substitute for fixed income. It offers a 200-300 basis point yield spread

compared with national ten-year government bond yields and attractive net operating income (NOI) growth

perspectives, especially given that inflation concerns are expected to rise over the mid to long term.

Housing needs to be affordable

Ongoing urbanisation is causing rent and property prices to rise in all major European agglomerations, which

is challenging housing affordability. The relationship of expenditures to the resources available to a household

is the most widely used measure to define or evaluate housing affordability. As a rule of thumb, a threshold

of 30% is seen as the cut-off above which housing becomes ‘unaffordable’. But given the complexity of the

concept, strategic recommendations within this framework must always be adapted and augmented with

respect to the project under consideration.

Be aware of the credit cycle

With COVID-19, credit standards are again tightening significantly. Risk perception has clearly increased

due to growing uncertainty around the impact of the pandemic on the economy and unemployment levels.

Therefore, it will become more difficult for private households to obtain loan approval for house purchases.

But there are many more indirect impacts that institutional investors need to consider. Take the relationship

between changes in credit standards and the growth of house prices or the effect on rental growth as two

examples that need to be incorporated into business plans.

The future is data intelligence

Access to data nowadays is more critical for decision making than ever. Although looking at institutional real

estate investments with a machine involves several difficulties, intelligent analytical methods can be applied

to detect relationships, find unknown life in data and discover patterns that may intuitively seem logical,

but that could not be previously validated. Spatio-temporal regressions, or analytical tools like the PATRIZIA

Amenities Magnet show the way to the future and will improve decision making and ultimately

investment performance.

Residential remains the place to be

Over the past six months COVID-19 has changed our lives, but compared to a year ago, market fundamentals

for investing in European multifamily housing remain largely unchanged. The general imbalance between

supply and demand continues as net additions will most likely be zero or only slightly positive. Consequently,

pressure on residential prices and rents will remain. Overall investors can expect total returns for European

buy-and-hold multi-family housing strategies ranging between 5% to 6% per annum over the next five years, of

which 2.5% to 3.5% will be income return.

Source : Company