Big investors drive up property prices in European cities, study finds | Europe

The pace at which institutional investors, such as private equity and pension funds, are buying homes is accelerating in major European cities, driving up property prices, research shows.

The volume of purchases in Europe reached €64bn (£53bn) in 2020, with around €150bn of property stock conservatively estimated to be in the hands of these large investors.

Berlin, with 40 billion euros of real estate assets in institutional portfolios, twice the value found elsewhere in Europe, leads the ranking, followed by London, Amsterdam, Paris and Vienna, according to the analysis of the Preqin private database of investors, funds and large deals.

Research by Daniela Gabor, professor of economics and macro-finance at the University of the West of England, and Sebastian Kohl of the Free University of Berlin, suggests that housing in Europe has become a “class of ‘assets’ increasingly attractive to investors, in part due to near zero interest rates and an encouraging regulatory framework.

Data from the European Central Bank shows that real estate funds in the Eurozone reached €1 billion in 2021, the size of Spain’s GDP, up from around €350 billion in 2010. residential assets would represent an increasingly large share.

Between 2012 and 2021, the number of large residential transactions involving institutional investors increased the most in Germany (from 16 to 92), Denmark (from 2 to 13) and the Netherlands (from 2 to 60).

Private equity firm Blackstone, the world’s largest institutional owner, manages approximately $730 billion in funds globally, of which $230 billion was allocated to real estate as of September 2021. Blackstone, which recorded record profits in October 2021, owns 65,000 residential units in five European countries. countries.

A Blackstone spokesperson said the company believed it had played a “positive role in tackling the chronic lack of housing across the continent” by “investing hundreds of millions to improve tenant properties”.

He said: “The significant shortage of housing across the world is the cause of the increase in rental rates.

“Blackstone owns a tiny fraction of the tens of millions of rental properties in Europe. Given our ownership levels, we do not have the ability to influence broader rent trends and anyone who suggests such a small player could influence rental rates is engaging in a deliberate misunderstanding of how of the market.

“We pride ourselves on being responsible custodians of rental accommodations and are committed to our residents, which is why we have programs in place to help residents in financial difficulty.

As countries across Europe face pressure from high rents, property prices and energy costs, the role of institutional landlords in the housing market is nonetheless increasingly coming under scrutiny. public anger.

The Irish government last year sought to discourage purchases of multiple homes by large investors by raising stamp duty to 10% on the purchase of more than 10 homes.

Spain’s leftist government is seeking to ban the sale of social housing to investment funds and impose rent controls.

Berlin residents voted in a referendum last year in favor of a proposal that houses owned by private property companies with more than 3,000 units should be taken into public ownership.

Kim van Sparrentak, a Green MEP, who commissioned the study, said: “This study shows how big investors are playing Monopoly with our homes, focusing only on returns, rather than providing housing. .

“The EU must recognize that the housing crisis is not just about building more homes and that it must play its part in ensuring affordable housing as a fundamental right. Instead of tackling this problem, EU rules actually facilitate this trend. We need strong regulations to prevent large investors from taking over our housing stock.

The failure of the EU and national governments to tax the wealthy properly would facilitate the transfer of funds to pension funds and insurance companies, whose activities have, in turn, been boosted by the withdrawal of the Welfare state, it is said.

Low interest rates have encouraged investors to look for yields outside of “traditional” assets such as government bonds, and to look to new asset classes, including housing, according to the report.

According to data from Preqin, more than 4,000 institutional investors directed approximately $3.6 billion of their $136 billion in assets into European real estate in August 2021. Of these, 1,325 investors held assets residential properties in their portfolios. The value of real estate portfolios including homes would be around $2 billion.

Mary I. Bruner