More confidence in Dutch residential market, transaction volume increases with 60%

Improved sentiment amongst residential investors leads to higher transaction volume
During the first half of 2024, three developments led to a more positive sentiment in the residential investment market. Firstly, the introduction of the Affordable Rent Act provided clarity on the regulation of mid-market rental housing in the Netherlands. Although the act does not have a stimulating effect for all investors, the long-term certainty it has created is of great value to investors. Particularly due to this, investments by Dutch institutional investors resumed, increasing by 93% compared to the first half of 2023. Additionally, the ECB lowered the policy interest rate by 0.25% for the first time since the historic increases in 2022 and 2023. This reduction is a significant step in improving the financing of residential investments. Thirdly, the recovery of the housing market has led to successful acquisitions of existing portfolios by private investors with a  privatisation strategy in recent months. The transaction volume generated by private investors increased by 141% in the first half of 2024 compared to the first half of 2023.

6.545 new rental homes insufficient to reduce housing shortage in the Netherlands
Investments in new rental housing reached 1.68 billion euros in the first six months of 2024, a 45% increase compared to the first half of 2023. Particularly, Dutch institutional investors and housing associations invested in new construction. These investments will result in the construction of 6,545 new rental homes in the coming years. This is 1,500 more than after the first six months of 2023, but remains far from sufficient to curb the growth of the housing shortage. To meet the national government’s targets, housing associations and investors must collectively add over 40,000 homes to the rental stock annually.

Thijs Konijnendijk, Head of Research at Capital Value: “The lagging investments in new construction are partly explained by the fact that there are still too few investments from international institutional investors and real estate funds. For these investors, the tax regime in the Netherlands regarding residential investments is so unfavourable that they prefer to invest in other countries. Therefore, it remains important to consider fiscal measures to improve the investment climate in the residential investment market. This could include reducing transfer tax or expanding interest deduction.”

Number of issued building permits shows slight recovery
The key indicator for future housing construction, the number of issued building permits for owner-occupied and rental homes, shows a cautious recovery. The market for newly built homes for private buyers is picking up. This is also reflected in rising prices and permit issuance in the first four months of 2024. Up to April, 22,800 permits were issued, averaging over 5,700 permits per month. If this pace continues throughout 2024, a total of 68,000 permits could be reached. This would represent a 25% increase compared to 2023, but it is still far from sufficient to meet the target of 100,000 new homes per year.