International residential investors needed to realise housing production goals in the Netherlands

International investors are vital to new-build investments
International capital is highly needed, especially for realising larger new-build developments. Over the past 10 years, international investors have grown in their capability and desire to invest in newly built Dutch residential assets. Their share in total investments in newly built rental homes is 24% on average over the past 6 years and displayed a distinct upward trend up to the outbreak of the Ukraine war and the subsequent rise in interest rates. On average, international investors invested close to 900 million euros per annum in newly built rental homes. Research by Capital Value shows that 85% of international investors indicate to be interested in either development opportunities or turn-key assets, or both (2023 survey).f

International capital needed for larger developments
In addition to the much-needed investments in newly built homes, international investors also bring a specific interest in larger projects to the Dutch market. Where Dutch pension funds, the most articulated group of Dutch investors in this asset class, typically prefers transactions of 20.7 million on average, international investors prefer ticket sizes of 40.4 million euro on average. Average transaction sizes by international investors differ in size over time, with a peak of 64 million on average in 2022, but investments from Dutch investors have never exceeded 34 million on average. Although Dutch pension funds are expected to purchase larger projects in the coming period, more capital is needed to realise ambitions in the Netherlands.

Previous research from Capital Value shows that 62% of international investors indicates to be interested in ticket sizes of 50 million or larger (2023 survey). All international investors prefer either mid- rental or unregulated rental homes, but interest for regulated rent (85%) and student housing (69%) is also significant. International investors have valuable experience with housing production for specific segments of the market such as student housing or care homes in other countries. This knowledge is of great benefit to the Dutch market and its efforts to complete more homes in these segments.

Assessment of current fiscal measures needed
International investments supplement the investments made by Dutch funds and housing associations and is vital to achieve the housing production goals in the Netherlands. However, to make investments in (new) rental homes in the Netherlands more attractive, fiscal measures that are currently in place or planned need to be assessed, such as the revision of the earningsstripping measure and the high RETT, in an international perspective. The comparison with the fiscal regime in other countries is relevant, as international investors can simply decide to invest in a country with more favourable conditions. The increase in fiscal measures has in tandem with the increase in interest rates contributed to the decay of the status of the Dutch market in their view. This needs to be urgently reviewed to help increase the favourability of the Dutch market.

Thijs Konijnendijk, head or research Capital Value: “For a long time the Netherlands held a no. 1 position as country to invest in. Due to the announcement of various regulations in combination with the increase interest rate, international investors started looking at other possibilities. Now that other circumstances like the interest rate development are gradually becoming more favourable, the reassessment of fiscal measures could help the recovery of international investments in the Dutch housing market.”