Property investments fall to lowest level since 2014

Rising interest rates heavily burdened the value of offices, industrial buildings, and other commercial real estate. Investors are increasingly withdrawing from that market, the Dutch department of real estate advisor CBRE reported. Real estate investments in the last quarter of 2022 hit the lowest point since 2014.

Real estate investments in the last three months of 2022 amounted to 4.2 billion euros, according to CBRE Netherlands. That is 40 percent less than in the same period in 2021. Over the whole of 2022, investment in offices, industrial buildings, and rental homes fell by 5 percent.

The value of investments in commercial real estate fell across the full breadth of the market for the first time since 2013 when the credit crisis was happening. Depending on the category, it involves reductions of 5 to 30 percent. Offices and logistics real estate showed the strongest decreases. Investment in homes also fell, but less sharply.

The main culprit is the interest rates, which have risen sharply in the past year due to central banks’ measures against high inflation. Before interest rates started to rise, returns on real estate investments were already low because prices had risen sharply in the previous period. As a result, a limited increase in the interest rates already put heavy pressure on the prices.

Investments in the housing market also declined for other reasons. The Cabinet plans to regulate the rents of more properties, which is causing more restraint. New tax rules decreasing returns on rental homes are also discouraging investors.