The recovery in the Dutch residential investment market is driven by several factors, including recent interest rate cuts by the ECB, the promise of further rate cuts, more stability in housing market regulation from The Hague, and the rising value of owner-occupied homes (vacant value). The lower interest rates, combined with the rising vacant possession value, make the acquisition of large portfolios with existing rental homes with a privatisation strategy profitable. The analysis of the transaction volume shows a particular increase in the number of transactions over EUR 100 million. In 2023, there were only three transactions of this size, while in 2024, there have already been five. Private investors had the largest share in the total transaction volume with 41%, followed by housing associations with 32% and institutional investors with 20%.
Investments in new-build only good for 8,800 new rental homes
Of the total transaction volume, 44%, or EUR 2.2 billion, was invested in new rental homes. Although investments in new-build are 41% above the level in the third quarter of 2023, this is not sufficient to reduce the housing shortage in the Netherlands. With this EUR 2.2 billion, 8,800 new rental homes can be realised in the coming years, while more than 40,000 per year are needed to meet the government’s targets for 2030. Investments in new -build are currently primarily made by housing associations (46%) and Dutch pension funds (38%). International investors contributed only 2%, well below their historical share of 26%. This is a missed opportunity as investments from international investors complement those of Dutch investors and they often acquire larger projects. Therefore, international capital is crucial to achieving the housing construction targets.
Fiscal measures needed to address housing shortage
If the recovery in the Dutch residential investment market continues, a total transaction volume of approximately EUR 7.5 billion for 2024 is achievable. This is comparable to the volume in 2021. However, investments in new-build are still insufficient to successfully combat the housing shortage.
Thijs Konijnendijk, Head of Research at Capital Value: “It remains necessary to critically examine ways to improve the investment climate for new rental housing. The reduction of the transfer tax to 8% by 2026 is not sufficient and is a classic example of “too little, too late”: the reduced rate will already be overtaken by rising construction costs and inflation before its implementation in 2026. The rest of the fiscal landscape, including the tax on real estate shares, the earnings stripping measure, and corporate tax, will also need to be evaluated to make the Dutch residential investment market more attractive to international investors, Dutch pension funds, and housing associations in the Netherlands.”
