Housing is increasingly attractive asset for institutional investors due to near zero interest rates
The rate at which institutional investors, such as private equity and pension funds, are buying up housing is accelerating in major European cities, driving up house prices, research suggests.
The volume of purchases in Europe hit €64bn (£53bn) in 2020, with about €150bn worth of housing stock conservatively estimated to be in the hands of such large investors.
Berlin, with €40bn worth of housing assets in institutional portfolios, double the value found anywhere else in Europe, is at the top of the league table, followed by London, Amsterdam, Paris and Vienna, according to analysis of the Preqin private database of investors, funds and large transactions.
The research carried out by Daniela Gabor, professor of economics and macrofinance at the University of the West of England, and Sebastian Kohl at Berlin’s Free University, suggests Europe’s housing has become an increasingly attractive “asset class” for investors in part due to near-zero interest rates and an encouraging regulatory framework.
European central bank data shows that real estate funds in the Eurozone reached €1tn in 2021, the size of Spain’s GDP, from about €350bn in 2010. Within that, residential assets are said to be an increasingly important part.
Between 2012 and 2021, the number of major residential transactions involving institutional investors increased the most in Germany (from 16 to 92), Denmark (two to 13) and the Netherlands (two to 60).
The private equity company Blackstone, the world’s largest institutional landlord, manages about $730bn in funds globally, of which $230bn was allocated to real estate in September 2021. Blackstone, which posted record profits in October 2021, owns 65,000 residential units across five European countries.
A Blackstone spokesman said the firm believed it played a “positive role in addressing the chronic undersupply of housing across the continent” through “investing hundreds of millions to improve properties for tenants”.
He said: “The significant undersupply of housing across the globe is the cause of rental rate increases.
“Blackstone owns a tiny fraction of the tens of millions of rental properties in Europe. Given our ownership levels, we have no ability to impact broader rent trends and anyone suggesting that such a small player could influence rental rates is engaging in a wilful misunderstanding of how the market works.
“We are proud to be responsible custodians of rental housing and we are committed to our residents, which is why we have implemented programs to help residents facing financial difficulties.”
With countries across Europe facing the squeeze due to high rent, property prices and energy costs, the role of institutional landowners in the housing market is nevertheless increasingly becoming a target of public anger.
The Irish government sought last year to discourage multiple house purchases by large investors by increasing stamp duty to 10% on the purchase of more than 10 houses.
Spain’s leftwing government is seeking to ban the sale of social housing to investment funds and to impose rent controls.
The residents of Berlin voted in a referendum last year in favour of a proposal that homes owned by private real estate companies with more than 3,000 housing units should be taken into public ownership.
Kim van Sparrentak, a Green MEP, who commissioned the study, said: “This study shows how large investors are playing Monopoly with our homes, focusing only on returns, rather than providing a place to live.
“The EU needs to recognise that the housing crisis is not just about building more housing and that it needs to play its role in ensuring affordable housing as a fundamental right. Instead of addressing this problem, EU rules are actually facilitating this trend. We need strict regulations to counter large investors from taking over our housing stock.”
The failure of the EU and national governments to properly tax the wealthy is said to be facilitating the transfer of funds to pension funds and insurance companies, whose businesses have, in turn, been boosted by the withdrawal of the welfare state, it is claimed.
Low interest rates have encouraged investors to search for yield outside “traditional” assets such as government bonds, and to move into new asset classes, including housing, the report argues.
According to Preqin data, more than 4,000 institutional investors, directed about $3.6tn of their $136tn assets to European real estate in August 2021. Of these, 1,325 investors held residential assets in their portfolios. The value of real estate portfolios that include housing was said to be about $2tn.