The pivotal year 2013, when we saw the first signs of a fragile recovery, was followed in 2014 by a year of steady growth and in 2015 by a year of optimism in the market. The economic recovery firmed up and this created a strong dynamic on the owner-occupier and rental housing markets, which in turn led to more transactions and higher prices. This dynamic was also evident on the investment market, which saw numerous transactions and lower average gross initial yields1).
The number of households is set to grow to 8.5 million by 2030, an increase of 775,000. Although families are still the largest group in the Netherlands, their proportion is no longer increasing. Growth is coming from households of people aged 65 and up, and in particular single-person households 2). There are major regional differences in this trend. The prognosis does not yet take into account the growing influx of refugees. In practice, the number of households in the Netherlands is set to grow a little faster. The housing shortage will remain unchanged in the coming years, especially in the Randstad region and in the larger Dutch cities (see map Housing shortage in 2020).
Table prognosis households 2015 – 2030
Families (incl. single parent)
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Economic recovery firms up
In 2015, the economic recovery continued. For the first time since the crisis, the economy grew by more than 2% 3). Inflation remained low and household purchasing power increased 4). The number of jobs increased and unemployment fell by 8.6% to below 590,000 jobless 5). The consumer confidence index increased throughout the year to 106 from 94. Since November 2015, the consumer confidence index started to decrease to 99 in February 2016 6). The economic outlook for 2016 is positive. The Dutch central planning bureau (CPB) expects 2016 to see another drop in unemployment figures, continued growth in the residential market, as well as in consumer spending, purchasing power and wages 7).
Housing shortage in 2020 (as % of housing stock) 8)
Strong recovery on the owner-occupier property market
The economic recovery in 2015 was accompanied by a continued recovery on the residential property market.
The drop in unemployment, low interest rates, rising wages and purchasing power all boosted the dynamic on the market. In 2015, a total of around 180,000 homes changed hands, an increase of 16% compared with 2014 9). The average purchase price for existing owner-occupier homes increased by 5%. The new-build segment is also showing healthy growth. Some 20,800 new-build homes were sold in 2015, compared with 18,300 in the previous year 10). The number of permits issued for new-build projects increased strongly, by 45% to more than 50,00011).
Increasing dynamic also good for the rental home market
The economic recovery and the increasing dynamics on the residential market generated a lot of movement in the housing market, which in turn increased demand for rental homes in 2015. The turnover rate increased and rental prices in the market saw a clear rise 12). Due to the shortage of mid-rental segment homes (which is not yet being met with new-build homes), we expect to see continued pressure on the rental market in 2016 and beyond. Shortage on the mid-rental segment is also increasing as a result of government policy measures. Housing associations are forced to withdraw from the segment and home buying is slowly becoming more difficult (more information on this in the next section). The pressure on the rental market does differ per region. Due to ongoing urbanisation, the number of households with median or high incomes is primarily increasing in the country’s urban centres (see map Forecast growth households with middle or high income 2015-2030).
Forecast growth households with middle or high income 2015-203013)
Changes in legislation have a positive impact on position of investors
Dutch housing associations are currently implementing the revised housing act. This act stipulates:
a tight demarcation of the tasks of the corporation to DAEB-activities (social activities)
the de-regulation limit of €710.68 (monthly rent) to be frozen for three years
that from 1 January 2016 onwards, in home allocations, corporations have to offer 95% of householders receiving housing benefits a home with a rental price below the de-regulation limit.
that over the next five years, at least 80% of the property of a housing association must be allocated to households with an annual income of up to €34,911 and at least 10% must be allocated to households with annual income of between €34,911 and €38,950.
Due to these requirements, housing association homes will be almost entirely restricted to low-income households and middle income households will be looking for homes in the non-regulated rental market. In addition, the focus on DAEB activities and the administrative or legal separation of market activities (such as renting out non-regulated rental homes) creates opportunities for investors to acquire non-regulated rental homes from housing associations.
The House of Representatives also approved the bill ‘Circulation rental market’ (Doorstroom huurmarkt) in February of 2016 and the bill has now been sent to the Senate. This bill includes the following provisions:
A rental sum approach (inflation +1%) will be introduced for housing associations as per 2017
From 2017, tenants will be subject to an annual income test. An additional rent increase of maximum the rate of inflation plus four percent may be imposed on households with an income above €38,950. Pensioners and large families of four persons or more are exempt from this.
Introduction of new rental contracts for defined short periods
Introduction of the ‘Circulation rental market’ legislation will have a limited positive impact for investors, as the rent increases in the regulated segment may remain similar as those investors have realised in past years. The effort to tackle the problem of middle-income households living in regulated homes by means of higher rent increases will also continue. In addition, the bill creates more possibilities for temporary rental contracts, which will boost circulation in the sector to non-regulated rental homes.
For 2016, the policy on rental prices of non-regulated rental homes is as follows:
For housing associations, the maximum rent increase has been set at 2.1% (applicable to independent housing)
For households with an income up to €34,678, the maximum rent increase has been set at 2.1%
For households with an income between €34,679 to €44,360, the maximum rent increase has been set at 2.6%
For households with an income above €44,360 the maximum rent increase has been set at 4.6%
The various policy measures aimed at the owner-occupier market will on balance have a limited impact in the residential rental market. On the one hand, the continued low interest rates and the increase in gift tax exemption are reasons for households to buy homes. On the other hand, the reduction of the LTV (loan-to-value ratio) to 102% (up to 100% in 2018 and there is pressure from DNB to reduce the LTV to 90%) and the lowering of the national mortgage guarantee (NHG) to €225,000 from 1 July 2016 will discourage some households from buying homes.
Overview of main changes in rental and owner-occupier housing market legislation in 2015
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1 January 2015
Adjustment de-regulation limit to €710.68
1 July 2015
Introduction of new housing act: associations will have to focus on their core task (division of DAEB / non-DAEB, or social / commercial), more appropriate allocation of rental homes, de-regulation limit of €710.68 (monthly rent) to be frozen for three years per 1 January 2016
1 July 2015
The maximum mortgage amount has been cut for mortgage interest rates of below 3.5%.
1 July 2015
The maximum mortgage covered by the National Mortgage Guarantee drops to €245,000 from €265,000.
1 July 2015
Reduced VAT rate back from 6% to 21% for renovations, repair and garden maintenance at homes
1 October 2015
Introduction of new WWS (home valuation) system amendment
Pressure on residential investments reduces initial yields
The total residential real estate investment volume was €3 billion in 2015 14), compared with €3.25 billion in 2014 15). In addition to foreign investors (€800 million in 2015, €1.65 billion in 2014), in 2015 private individuals invested some €600 million (€650 million in 2014) and institutional investors invested around €1.6 billion (€850 million in 2014) 16). The biggest transactions of 2015 were overshadowed by those in 2014, as no major portfolios were available last year. This was partly compensated by the major flow of medium-sized transactions. Last year saw some 23 transactions worth €40 million or more. Amsterdam was the favourite target for investors in 2015: more than €600 million in residential investments (20% of the total) 17). The pressure on the market did lead to investments in secondary locations and less favourable product-market combinations 18). The increased demand also translated into a further drop in gross initial yields 19). In top locations, initial yields are averaging between 4.5 and 4.8 percent (4-4.5% in Amsterdam, 4.5% in The Hague and 4.75% in Rotterdam) 20).
- 1Vastgoedmarkt, Woningspecial December 2015.
- 2Socrates 2015.
- 3CPB Policy note 2015/17 December estimate 2015.
- 4CPB Policy note 2015/17 December estimate 2015.
- 5CBS Statline.
- 6CBS Statline.
- 7CPB Policy note 2015/17 December estimate 2015.
- 8Socrates 2015.
- 9CBS Statline.
- 10NVM Annex PB Macro-economic analysis 14 January 2016.
- 11CBS Statline.
- 12IPD/MSCI Transaction monitor.
- 13Socrates 2015.
- 14Capital Value, Analysis of the Dutch residential (investment) market 2016.
- 15Vastgoedmarkt, Woningspecial December 2015.
- 16Capital Value, Analysis of the Dutch residential (investment) market 2016.
- 17Vastgoedmarkt, Woningspecial December 2015.
- 18Vastgoedmarkt, Woningspecial December 2015.
- 19Capital Value, Analysis of the Dutch residential (investment) market 2016.
- 20Vastgoedmarkt, Woningspecial December 2015.