The global economy continued to grow last year, certainly in the United States, where the growth rate was higher than in 2017. However, growth slowed in Asia and Europe in 2018. On a European level, the Dutch economy has grown faster than that of any other Western European country over the past few years. This growth continued strongly in 2018. This growth was driven – more than in the past – by domestic spending. For the past 19 quarters, consumers have spent more than in the year-earlier period, a trend driven in turn by high consumer confidence scores.
The above-mentioned trends also have an impact on the real economy. A large part of the world has seen an extended period of economic growth. This growth will stop at some point. We are already seeing the first signs of this slowdown in regions that recorded the strongest growth after the most recent crisis. Economic growth is levelling off slightly in these regions and the rise in real estate values is flattening out. This does not necessarily mean that we are heading into a long-term economic recession. It could just as well be a correction that will last for a period of one or two years.
Real estate market
What did all of this mean for the real estate market in 2018? Due to the long period of low interest rates and the yield spreads that real estate investments offer, the invested capital in the real estate market remained high in 2018. The real estate investment market has profited strongly from the positive market sentiment of the past few years. Global investment volumes came in at € 1.5 trillion in 2018. The Netherlands itself saw high real estate investment volumes of € 20 billion last year.
Prices are currently high in all real estate sectors. But a number of economic and social challenges could bring this period of high prices to an end. For one, the European Central Bank (ECB) is expected to wind down its quantitative easing programme from mid-2019. Plus the effect of Brexit and the trade war could have a greater impact than expected and affordability on the housing market could continue to be a problem.
However, Bouwinvest expects willingness to invest to remain high for real estate investments. Mainly due to the benefits real estate offers as an investment category: diversification and higher returns than other investment categories.