Dutch residential investment market shows signs of recovery in first quarter of 2024

17 april 2024

In the first quarter of 2024, over EUR 700 million was invested in Dutch rental housing. This transaction volume is similar to the first quarter of last year. After a sharp drop in volume at the end of 2023, this is a hopeful sign of recovery. Investors are increasingly showing interest in the current supply. Reasons are the expected fall in capital market interest rates, the rise in purchase prices and clarity on market regulation. If this trend continues, the transaction volume in 2024 will be higher than last year. A key area of focus remains the realisation of new-build rental properties. Only 1,260 new rental homes were sold in the first quarter, while at least 30,000 should be realised this year. The number of January building permits has not been this low in 10 years. Without incentives, the Netherlands is heading for a new low of 50,000 permits in 2024. 

Mainly private investors active
The transaction volume in the Dutch residential investment market, at EUR 700 million in the first quarter, is as high as in the first quarter of 2023. A striking feature of transactions in the first quarter was that private investors in particular bought rental properties, their share rising to 40% of the total transaction volume (compared to 31% in 2023). This is largely explained by the buy-out strategy of a large proportion of these investors, who thereby capitalise on the difference in growth between the vacant value and market value of rented properties. Institutional investors also increased their share of transactions to 29% of the total (25% in 2023). Housing associations were less active with a 23% share. Capital Value expects an increase in activity from Dutch and international institutional investors in the coming period due to the upcoming clarity on the Affordable Rent Act and the expected drop in capital market interest rates later this year. Housing associations also want to invest more in affordable rental housing.

Investment in new construction far below required volume to combat Dutch housing shortage
Much more investment in new-build (rental) housing will be needed in the coming years to effectively address the housing shortage in the Netherlands. With the current trend in the number of building permits, it is possible that only 45,000 to 50,000 new homes will be licensed by 2024. In this case, the housing shortage increases further to 450,000 homes. While the share of investment in new-build rental housing was high at 45% in the first quarter of 2024, it produces only 1,260 new rental housing units in the coming period. Growth in investment volume in new-build rental housing will require more (international) capital and more attractive loans. The decline in purchases in new-build rental housing is mainly due to increased interest rates and uncertainty about the many (tax) regulations for the housing market from the central government.

Incentives needed in the short term
Despite expectations that capital market interest rates will fall in the coming months and more clarity on the Affordable Rent Act will be provided, a boost to the new construction market remains necessary. Even if more investor capital becomes available for investment in Dutch rental housing, it will not be enough to reduce the Dutch housing shortage. Incentive measures such as the 'Doorbouwfaciliteit' proposed by Capital Value, in which the government makes it possible to start new construction projects earlier through guarantees, or the introduction of a 'Middenhuurfonds'(fund for the mid-priced rental segment) with attractive lending conditions for housing associations and investors can help. For (inter)national investors, a lower transfer tax and long-term regulatory clarity in particular play an important role in making new investments in the Dutch housing market feasible. Market players and government should also cooperate even more intensively to make projects feasible and permit procedures should be accelerated.

Thijs Konijnendijk, Head of Research at Capital Value: "The challenges for building sufficient affordable (rental) housing in the Netherlands are so enormous that this calls for an integral, long-term vision in which clarity and incentives are offered to market parties and housing associations. We see that prices of both owner-occupied and rental homes are rising as a result of the huge scarcity and high interest rates, while the parties that can provide affordable rental housing are having the greatest difficulty realising new construction. We therefore call for action to be taken especially to address project feasibility, long planning procedures and lack of clarity on regulations and incentive schemes."

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