Outlook

The higher risks associated with the real estate market was underlined by the return of yield decompression in the second half of 2022. The uncertain impact of rent regulation, high construction costs and rising interest rates create a weaker real estate market environment. At the same time, inflation, higher mortgage rates and high energy prices negatively impact consumer confidence.    

The downward trend that started in Q3 picked up speed in Q4  and is expected to continue in the first half of 2023, as the real estate market will seek to find a new balance a.o. based on a structurally higher cost of capital. The imbalance resulted in a steep decline in investment activity which is likely to be exacerbated by the rise in transfer tax effective from January 1st. The prevailing high construction cost levels and mismatch in price expectations will further limit the feasibility of new projects.

The long-term trend for the ARC Fund is likely to remain favorable based on the significant shortage of housing and increasing demand for the unregulated rental market. The modern and relatively energy-efficient portfolio is expected to remain resilient in the current market environment which is also underlined by the low vacancy rates for the standing portfolio and the low level of rent arrears. In addition, the ARC Fund is well capitalised for the medium term and maintains a low LTV, which provides optionality to pursue investment opportunities when they arise. For the short-term growth of the ARC Fund is likely to be hampered due to a lack of feasible new projects.

Amsterdam, the Netherlands, 24 April 2023

H-W. Wensing, Fund Director

G.N. von der Thüsen, Director Finance and Risk

D. Wedding, Portfolio Manager