Owner-occupied and rental markets under pressure
The combination of elevated construction costs and higher interest rates is affecting both demand and supply. Project feasibility is becoming more challenging, while buyers are growing more cautious. This is reflected in moderating price growth, longer selling periods and, over time, the risk of declining demand. In the rental housing market, new-build projects are coming under further pressure as a result of higher construction costs. A clear divide has already emerged in the new-build rental segment: projects are now primarily acquired by (institutional) investors with sufficient equity. For other investors reliant on debt financing, interest costs are too high relative to achievable yields.
Although 2025 saw a record level of investment in new-build projects by Dutch institutional investors, a repeat of this performance is far from certain given rising construction costs. If institutional investors start to increase their target initial yields, a mismatch between costs and revenues will emerge, rendering projects economically unviable.
Government can prevent a new ‘construction dip’ through targeted measures
During the 2022–2023 period, a range of recommendations was developed to mitigate the effects of an energy crisis and limit demand contraction among buyers and investors. Current geopolitical developments do not necessarily have to result in a new ‘construction dip’, provided that the right instruments are deployed in a timely manner.
Appropriate measures to address weakening demand were identified in earlier research by Capital Value, commissioned by the Ministry of Housing and Spatial Planning (VRO), and can be applied to both the owner-occupied and rental housing markets. For the owner-occupied market, these include a completion guarantee, a construction continuity facility, and financing of construction interest costs for buyers. The rental housing market could be supported through instruments such as a mid-rental segment fund, or through broader measures including a reduction in the tax burden in Box 3 or a further decrease in transfer tax. In addition, an improved fiscal climate for international investors and housing associations remains essential.
Arjan Peerboom, CEO of Capital Value, commented: “It is inevitable that the Dutch housing market will be affected by the consequences of the conflict in the Middle East. It is crucial that lessons from the recent past are applied now to prevent a new construction downturn. The risks to new-build housing are currently being underestimated, while housing delivery targets cannot afford further delays. Only then can we prevent the housing shortage from increasing further. A range of solutions is readily available to avert a new construction dip, and we therefore call on the government to take swift action.”
