Cabinet formation and plans
In January, the third cabinet led by Prime Minister Mark Rutte collapsed, and Dutch parliamentary elections were held on March 17. After a record formation period of 299 days, a ‘Rutte-IV’ cabinet was established in December. The coalition of four parties (VVD/D66/CDA/CU) reflects the composition of the previous cabinet. The cabinet will face the challenge of dealing with a number major issues. Besides the Covid-19 crisis, the main focus points will be the climate and the nitrogen emissions crisis, plus the housing market. Furthermore, the government is planning to allocate more funding to education, justice and security.
The new government reintroduced the position of Minister of Housing and Spatial Planning (filled by former Health Minister Hugo de Jonge). The goal for the coming cabinet period is to build around 100,000 new homes per year (with at least two-thirds in the affordable category). These will be built primarily in the 14 designated urban areas in the government’s NOVI programme. An annual sum of € 7.5 billion will be allocated to infrastructure around new housing developments. The government is also planning to abolish the landlord levy (‘verhuurdersheffing’) for social rental housing.
As of 1 January 2021, the real estate transfer tax (RETT) for property acquisitions increased to 8%, for residential as well as for commercial real estate. To put a further brake on record house price increases, the transfer tax for investors will be increased to 9% as of 2023. Further measures include stopping the € 100,000 tax exempt gift (for house purchase purposes). In 2021, a number of local authorities also introduced initiatives, such as the halt on buy-to-let within the existing housing market.
In 2021, the caretaker cabinet foced for the most part on fighting the Covid-19 pandemic and finding a balance between limiting the spread of the disease and keeping the economy and companies healthy. Despite the continued roll-out of the vaccination programme, lockdown measures came and went in 2021, which had a major impact on the (non-essential) retail and hotel and leisure segments. While most restrictions were lifted in the course of the third quarter, November and December in particular once again saw heavy restrictions for retailers.
The Dutch government implemented a set of emergency measures to mitigate the financial burden placed on companies by the Covid-19 outbreak. The initial plan was to end most of these measures from 1 October 2021 onwards. However, following the emergence of the new Omicron variant and the reintroduced lockdown, financial measures were extended. It is notable that although the companies affected have complained that the restrictions have led to a substantail reduction of their financial buffers, 2021 still saw the lowest rate of bankruptcies for many years.
In 2021, the owner-occupier market remained tight, as the number of homes put up for sale continued to decline while demand remained high. The prices for owner-occupied homes rose strongly and are still rising, mainly driven by the housing shortage and low mortgage interest rates. This is being further fuelled by bidding wars (80% of the bids are above the asking price), which increasingly involved buy-to-let investors. On a national level, the average house price increased substantially by 20.4% year-on-year and stood at € 396,800 in December 2021 (data CBS). As a result, the number of homes that are affordable for first-time buyers and low/middle-income households is shrinking rapidly. Consequently, these groups have to look for alternatives (e.g. rent) or remain unable to buy. The new cabinet has ambitious plans to stimulate the development of 100,000 houses a year in the coming 10 years, with a specific focus on developing affordable homes.
Another development on the owner-occupier market is that more and more local authorities are implementing measures for certain neighbourhoods or whole cities to discourage or prevent investors from buying homes in the owner-occupier market and subsequently renting them out. Local authorities are implementing these measures mainly in areas where buy-to-let investors have been responsible for a large part of the sales from the buyer-side, which means they are competing with regular households.
In February, outgoing Minister of the Interior and Kingdom Relations Kajsa Ollongren announced that rents in the regulated sector would not be increased in 2021. As of May 2021, landlords are allowed to increase rents in the liberalised sector by a maximum of 1% above inflation. This measure applies for three years. In addition, the outgoing cabinet wanted to maximise the impact of ‘WOZ’ (Real Estate Value Act) value in the WWS points system to 33%. This measure is not yet in force. The number of WWS points determines if a home can be rented out in the regulated or non-regulated sector.
Investor appetite remained strong in almost all real estate sectors and the overall investment volume totalled € 18.2 billion, just short of the € 19.0 billion in the previous year. This despite the negative effects of the increase in the real estate transfer tax from 1 January 2021, which spurred many investors to close their deals in Q4 2020 and led to subdued transaction volumes in the first half of 2021. Investment volumes in Dutch residential real estate therefore declined, but thanks to a stable demand, yields declined further in the second half of 2021, especially outside of the G4 cities.
In 2021, approximately € 3.2 billion was invested in the Dutch residential market (source: JLL). This was a 45% drop when compared with 2020. The majority of this volume consisted of investments in new-build rental homes. The transfer tax does not apply to new-build developments, as a result of which more parties were looking for investment opportunities in this segment of the market. Approximately 60% of the total invested volume consisted of investments in the Randstad conurbation (45% in the five biggest cities). Prime net initial yield for residential investments decreased from 3.10% in 2020 to 2.85% at year-end 2021.
Investor key factors
Prime net initial yields
Investment volumes (€ bln)
Sources: JLL, Bouwinvest Research & Strategic Advisory