Investment volume Dutch residential market drops 51 percent in 2023
19 december 2023
The transaction volume in the Dutch residential investment market reached EUR 3.8 billion in 2023, a 51% drop compared to 2022. Of the total volume, EUR 2.27 billion was invested in new-build rental housing. This amounts to about 9,000 homes and is a sharp drop from the average of 14,500 homes annually over the past five years. Due to increased interest rates and uncertainty about regulation of the Dutch housing market, investments in new-build rental housing are declining, especially among international investors. The most important investors in 2023 are housing associations, but even they cannot meet their targets. To achieve more affordable rental housing over the next two years, more incentives such as the Start Building Impulse are needed.
Investment volume Dutch residential market EUR 3.8 billion
The transaction volume of EUR 3.8 billion in 2023 is a sharp 51% drop from the EUR 7.6 billion in 2022. The main reasons for the decline in investor interest are increased interest rates and uncertainty about housing market regulation. International investors in particular are taking a wait-and-see approach. Their share of transaction volume fell from 27% in 2022 to 11% in 2023. On the contrary, housing associations' share increased to 37%, from 23% in 2022
Number of new-build rental homes sold falls by 5,500
A total of EUR 2.27 billion was invested in new construction of rental housing in 2023. This is only enough to realise about 9,000 homes. Investment in new construction is declining. In 2022, the total volume invested in new-build homes was 3.3 billion euros. Over the past five years, an average of 14,500 new-build rental homes were sold each year. Of the 9,000 houses that can be built from investments in 2023, 4,300 will be built by housing associations. Investments in new-build rental housing by housing associations increases substantially but are still not sufficient. Housing associations aim to build 28,100 homes by 2023 and 39,800 by 2024. An important note is that Capital Value can only measure market transactions and that total investments made by housing associations in new construction will probably be higher than the volume included in these figures (over EUR 900 million).
Dutch institutional investors invested about EUR 670 million in new rental housing, for which about 2,900 houses can be built. On average, these investors built about 9,000 homes per year over the past five years. Investment in new construction by international investors also declined. In 2022, they were still investing about EUR 900 million in new-build rental housing, in 2023 it was only over EUR 200 million. This is not a good development for the Dutch housing market. International investors often invest in larger projects, making them complementary to Dutch investors.
Clarity on regulation and incentives are needed
Investors need clarity and predictability on regulation. With the fall of the Dutch government and the critical rulings of the Council of State on the Affordable Rent Act and the Act on Strengthening the Regulation of Public Housing, that clarity remains absent. These bills have a significant impact on the rental housing market and make investors wait and see. Clarity on the form and timing of regulation is important to make the Dutch residential investment market more attractive. In addition, more incentive measures (such as the Start Building Impulse) or a reduction in transfer tax on rental properties would help trigger more investment in the Dutch residential market.
Thijs Konijnendijk, Head of Research & Data Intelligence at Capital Value: "It is worrying that the number of investments in new-build rental housing is declining. There are enough construction plans, but more incentives are needed to build these homes. Due to increased interest rates, many plans are simply not feasible. In addition, it is important for institutional investors to get clarity on possible national regulation as soon as possible so that they have long-term certainty. The new cabinet must do everything possible to prevent the Dutch housing shortage from increasing further."