The earlier housing and banking sector crisis has meant that economic growth in the Netherlands trailed Germany’s following the Great Recession, but the current economic picture is more upbeat and clearly above the “Core Eurozone”. Although slightly below previous quarter’s historic highs, the Q4 Economic Sentiment Index (ESI) for the Netherlands remains at elevated levels. Higher inflation will be a drag on households’ real disposable income, but with historically-high capacity pressures this should be compensated by solid nominal wage growth. Netherlands GDP for 2018 is expected to end at a sound 2.6% (y/y). However, a moderation of growth to 1.4% in 2019 is forecasted as external demand is expected to soften and capacity constraints begin to bite.
As strong investor interest pushes yields for prime assets further down, the pace of decline in prime yields in the Netherlands has slowed. Over the next five years solid income returns will remain a target for most investors and are expected to be the main driver of total returns. The expected reversal in yields over the forecast period is expected to keep capital growth contribution muted for most sectors. The residential market is the exception, where strong demand from occupiers as well as from investors is predicted to result in prolonged and strong capital growth over the forecast period. While the outlook over all asset classes is moderate in a historic context, prospects for logistics and residential remain positive.
Source: CBRE Global Investors Houseview H2 2018