The European residential sector has continued to show robust growth in demand from global institutional investors seeking a stable source of income and portfolio diversification.
Deal volumes in primary and secondary European cities have increased significantly over recent years, and overseas institutional capital continues to constitute an increasing percentage of this activity. Overall demand outstrips supply of institutional grade residential assets across the continent, and yield compression is expected to continue, particularly in secondary and tertiary European cities which are seeing increasing inflows of inward institutional investment.
Cross border activity is also increasing as institutional investors who have traditionally operated in one or more markets with similar dynamics and risk profiles, are now increasingly seeking assets across a broader range of geographies in Europe to access greater diversification and growth. Multifamily investment in core cities with strong demographics will remain high on investors’ wish lists for the foreseeable future, particularly as investors search for longer term stable income in a late cycle.
Another important trend across Europe is the increase of forward deals as a response to a shortage of existing institutional grade stock. The supply and demand imbalance of residential units, and the increasing wave of institutional capital seeking high quality assets has led to an increase in joint venture deals with developers and land owners as a means for investors to access returns. This has been a growing trend in the UK for example, where Built to Rent (BTR) has emerged as an exciting and dynamic new sub sector within the broader PRS sector to address the nascent shortage for residential housing.
The fundamentals of the European residential sector remain strong and countercyclical, and key macro trends including urbanisation and affordability for younger generations will continue to fuel demand for accessible rental property.Key-Vest offers investors access to institutional grade residential investment opportunities across Europe. Click here for more information.