Lower transaction volume in Dutch residential market
9 november 2021
The transaction volume in the Dutch residential investment market came to 4.2 billion euros in the first nine months of 2021 (Q1 through Q3). This is a 41% decrease compared to the same period in 2020, when the transaction volume amounted to 7.25 billion euros. This is the outcome of research performed by Capital Value. The drop is mainly due to the scarce availability of existing complexes and portfolios.More than half of the transaction volume in 2021 was invested in new-build and in property conversions. Capital Value expects that the fourth quarter will likewise mainly show new-build transactions in the residential investment market.
Lower transaction volume due to reduced availability of existing complexes
As a consequence of the boom on the residential investment market in the final quarter of 2020, in 2021 the market took longer to pick up speed than in previous years. In 2020, the transaction volume in just the fourth quarter came to 4.5 billion euros; a significant difference compared to the current 4.2 billion euros over the first three quarters of 2021. Many investors, and particularly Dutch institutional investors, brought their purchase decisions forward at the end of last year on account of the statutory increase in property transfer tax from 2 to 8%, as from 1 January 2021. As a result, they started 2021 with few existing portfolios for sale. The volume for 2021 so far corresponds with the transaction volume achieved by mid-2017.
Residential property investors and housing associations focus on new-build rental homes
Given the pressing housing shortage, private sector parties, housing associations and the government are concentrating on new-build rental homes. The new-build output and supply has been strong in 2021. Dutch new-build rental homes are a popular product among Dutch pension funds and international investors. Until and including the third quarter of 2021, 56% of the transaction volume – that is, some 2.4 billion euros – consisted of investments in new-build rental homes. Another 2% was invested in redeveloping and converting real estate into new rental homes. This percentage was considerably lower in previous years: in 2020, the proportion of investments in new-build came to 34%. This represented a total of 3.9 billion euros invested in new-build real estate over the whole of 2020.
Higher property transfer tax remains noticeable
The higher property transfer tax on existing rental homes not only affected the market in 2020, but continues to affect 2021. Last year, the increase spurred a greater number of transactions in the final quarter; this year, the number of transactions by Dutch private investors in particular is clearly lower than in 2020. The drop in the number of transactions worth more than 1 million euros in the period of the first three quarters comes to almost 25%, going from 353 to 266. Another explanation for this decrease could be the current uncertainty regarding new government measures for the residential investment market, to be fleshed out further once the new government is installed. This specifically concerns the potential implementation of a self-occupancy obligation and an expansion of the home valuation points system to (part of) the liberalised rental market.
Marijn Snijders, Director of Capital Value: "It's good to see that the proportion of new-build in the transaction volume has increased significantly compared to last year. New-build output is vital to alleviating the housing shortage. There is still a huge amount of capital available for investments in both existing and new-build rental homes. Private parties and the government will need to step up their efforts to accelerate projects in order to make optimal use of this capital." 
More information?
For more information on our research on the Dutch residential investment market, please contact Thijs Konijnendijk, Head of Research.