In 2020, the Dutch government announced additional measures aimed at increasing the affordability of the housing market. These measures include maximising the ‘WOZ’ (Real Estate Value Act) value in the housing valuation system to 33% and maximum annual rent increases of 1.0% above inflation for homes in the liberalised rental sector for at least three years. This last measure does seem to have averted the need for the government’s so called ‘emergency button for mid-rental homes’, which includes far more drastic measures. However, Amsterdam and other local governments say these measures do not go far enough, so we could see local authorities introducing additional measures to safeguard the affordability of the rental housing market.
On Budget Day 2020 ('Prinsjesdag'), the Dutch government announced additional measures to improve the accessibility of the housing market, including: increased investments to accelerate housing construction and additional capital to remove obstacles due to the nitrogen emissions problem. The national government is also planning to intervene in the search for housing locations. However, the question is whether these plans will hold up after the March 2021 elections.
The proposed adjustment of the real estate transfer tax (RETT) is expected to have the most impact for investors. To give young starters an advantage over investors, commercial residential property purchases have been taxed at a rate of 8% from on 1 January 2021 (this was 2%). Young starters who meet various requirements can apply for exemption. The 2% rate will now only apply to the purchase of homes used as a principal place of residence. The impact of these measures on the valuation of residential portfolios will become clear in 2021.
The pressure on the housing market is the most pronounced in the Holland Metropole region. Despite Covid-19, house prices and rents are still rising in most regions, making fewer and fewer homes affordable. This is primarily hitting starters and low-income and middle-income households. Prices are expected to continue to rise due to low interest rates, the rising housing shortage and the lagging production of new homes.
We have not seen an additional increase in suburbanisation (people moving from larger cities to more suburban locations close to those cities) since the Covid-19 outbreak. However, the trend of families moving from larger cities to surrounding municipalities has been going on for some years. Foreign immigration to these cities has declined since early 2020. The G5-cities in particular are highly dependent on this influx of foreign workers for their population growth. If this influx remains relatively low for a prolonged period of time, it could have a negative impact on the growth of these cities. Due to the housing shortage, many households are finding it difficult if not impossible to relocate in the short term, which may result changing housing requirements at a later date. We expect to see sustained demand for rental housing in urban areas in the medium to long term. We believe the Holland Metropole has a wide variety of living environments with a high quality of life that matches this demand.
Occupier key factors The Netherlands
Average selling price
Average rent by institutional investors (sqm/month)
Sources: ABF Research, CBS, Calcasa, Bouwinvest Research & Strategic Advisory
The Dutch real estate investment market started the year strongly, with investment volumes of € 3.9 billion in Q1 2020. However, following the Covid-19 outbreak and the associated uncertainty regarding the economy and the various real estate sectors, investors reconsidered their tactical investment policies. Investments in retail, offices and hotels lagged for the rest of the year, while logistics investments and healthcare investments increased. The housing market also remained popular and the limited decline seen in this segment was primarily due to the lagging investment supply.
Overall investments in Dutch real estate totalled € 18 billion in 2020. While this was 15.7% lower than in 2019, it was still the fourth-highest volume ever recorded in the Netherlands.
We expect investors' appetite to remain high for real estate investments, supported by to the low interest rate environment, the yield spread offered by real estate and the direct and total returns it offers compared to (government) bonds and other asset classes.
The Dutch residential investment market accounted for 40% of the total investment volume and saw € 7.2 billion in investments in 2020, compared with € 7.6 billion in 2019. Residential property was once again the largest segment of the Dutch real estate investment market, as it has been since 2018. The resilience of the Dutch residential sector during the Covid-19 outbreak was the main reason why investment volumes more or less maintained their momentum. Investor interest remained high and resulted in a slight contraction of net initial prime yields in all major cities.
Investment key factors
Prime net initial yields
Investment volumes (€ bln)