Press Release

Modest resurgence in liquidity on the investment market

Investment in new-build homes declines by 73%

October 19, 2023

A close-up of the facade of a modern building, focusing on the architectural details. The building has a repeating pattern of balconies and windows, creating a grid-like structure on the exterior. The balconies protrude from the building, each with a glass balustrade that provides security while maintaining a clean and transparent appearance. The glass is clear, allowing a view of the balcony spaces, which contain objects such as chairs or plants, indicating that they are used by residents as outdoor spaces. The structure of the building around the balconies appears to be made of a dark material, possibly metal or dark painted concrete, which contrasts with the lightness of the glass. This dark framework frames each balcony and window, reinforcing the geometric aesthetic of the design. Each balcony is covered by the balcony above it, providing some protection from the elements. The windows adjacent to the balconies are large, allowing maximum natural light to enter the interior spaces. They are framed by the same dark material as the balconies. The overall color scheme consists of the dark tones of the structural elements of the building and the transparency of the glass. There is no sign of the base or top of the building; the image is cropped to show only a portion of the facade, emphasizing the pattern and design rather than the scale of the building.

Media Contact

Irene Martini

Associate Director of PR

Photo of irene-martini

In the third quarter of 2023, investment in real estate totalled €2.3 billion, up 28% on the second quarter. Receding inflation and stabilising interest rates have encouraged parties to return to real estate investment. A degree of liquidity seems to be returning to the market, though parties continue to adopt a rather cautious, wait-and-see attitude.

In terms of investment allocation in office real estate, a reversal in the trend appears to be emerging. Most striking, however, is the marked decline in investment volume in the new-build residential market, down 73% on last year. This is reported by CBRE Netherlands – part of the listed CBRE Group, the world’s largest real estate consultancy – based on figures for the third quarter of 2023.

A chart titled 'Figure 1: Total Investment Volume Q1-Q3.' The chart shows the investment volume in billions of euros for the first to third quarter of each year from 2015 to 2023. The data includes various sectors such as logistics, residential, office, retail, healthcare, hotel and other sectors. The information comes from CBRE Research.

Although performance in the third quarter traditionally outshines the two preceding quarters, this year CBRE notes that the decline in investment volume has been less marked in comparison with last year. Investment in the first quarter of 2023 was down 63% compared to the previous year. In the third quarter of 2023, the decline had slowed at 48%.

This suggests that a degree of liquidity is returning to the market, albeit at a much lower price level. CBRE is seeing a slight pick-up in the market as inflation seems to be receding and interest rates are stabilising. Most of the activity is on the part of buyers who have recently raised considerable liquidity to invest in real estate.

Investment allocation in the office sector still at a historic low

CBRE points out a historic low in the volume of office investments as a share of total investments. Only 15.8% of total investment volume was invested in office properties. For many years, this share had been as high as 30%, clearly indicating a trend reversal which began during the Covid pandemic. A sharp drop in value and uncertainty surrounding hybrid working are two key factors in this development. That said, it is worth asking whether this altered view of the risks associated with office investment is justified when the operating results of office properties are taken into consideration.

Investment in new-build homes drying up

The most notable trend of all is the huge drop in investment volume on the new-build home market, down by approximately 73% compared to last year. This can be explained by the rise in the necessary yield on these investments, partly due to rising construction costs and the stringent building programmes (geared towards affordability) which property developers are currently facing.

An adjustment to or expansion of housing programmes could serve to offset the pricing decrease. However, real world experience suggests that there is little chance of such measures being implemented in consultation with municipalities. To make the housing sector more shock-proof and enhance the financial viability of projects in economically volatile times, a more flexible attitude to the affordability programme is needed.

This image shows a graph titled 'Figure 2: Investment volume of new residential construction.' The graph shows the investment volume in residential new construction in billions of dollars from 2015 through Q3 of 2023. The data is from CBRE Research.

Buyer increasingly adopting smaller scale purchase strategy

For investments in existing housing complexes, the loss of momentum has been less dramatic. In this area, investment volume has declined by 44%, compared to new builds where the transaction volume declined by no less than 67%. Within this submarket, however, a clear change in the type of buyer can be observed. Prompted by rising interest rates, decreased investment value and the ongoing threat of regulation, these buyers are mostly investing in existing housing complexes as part of an individual sell-off strategy.

Expectations

Investors pursuing this strategy make these purchases with the aim of eventually selling the properties on an individual basis on the owner-occupied housing market. The surge in investors buying housing complexes through this strategy is an indication that many more properties will disappear from the rental housing market in the coming years. This is partly driven by a sharply deteriorating investment climate in which the continued management of rental properties provides insufficient returns compared to the individual sale of rental properties on the owner-occupied housing market. If this trend continues, the rental market will shrink by several thousand more housing units in the coming years.

This image shows a graph titled 'Figure 3: Purchasing Strategy Existing Housing Complexes'. The graph shows various percentages indicating the share of total investment volume in existing construction. There are year numbers from 2009 to 2023 (Q1-Q3) along the x-axis. The chart shows two strategies: the operating strategy and the eviction strategy. The data are from CBRE Research.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2024 revenue). The company has more than 140,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

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