In 2022, the Dutch government continued to face a vast number of fundamental challenges. In addition to dealing with the aftermath of the Covid-19 crisis, it had to deal with the Ukraine war, rising inflation, the nitrogen emissions crisis, as well as increased uncertainty in the housing market. In the national Budget Memorandum (‘Miljoenennota’) published in September, the cabinet allocated budgets and introduced new measures to combat some of these challenges. The focus was very much on supporting the purchasing power of lower and middle-income households by introducing an energy cap, increasing the minimum wage and related social security benefits, an income-related rent increase for tenants and several additional tax and allowance interventions.
The most significant elements in the new budget plans regarding real estate in general are twofold. First, the increase in the real estate transfer tax (RETT) to 10.4% from 8.0%, putting downward pressure on property prices. Secondly, as of 1 January 2025, fiscal investment institutions (FIIs), will no longer be allowed to invest in directly held real estate. If no additional measures are taken, the Fund will become subject to corporate income tax (‘vennootschapsbelasting’). Bouwinvest will mitigate this risk by anticipating and preparing a restructuring of the Fund into the legal form of a so-called closed Fund for Mutual Account (FMA; ‘Fonds voor Gemene Rekening’, FGR, in Dutch).
Residential real estate policies
In 2022, the Ministry of Housing and Spatial Planning provided more details on its proposed plans for the regulation of the liberalised rental segment. These plans foresee a threshold in which rents, calculated on the basis of the Dutch ‘WWS’ points system, up to approximately € 1,000 a month (current price level) will fall within the regulated rental segment (this threshold is currently € 763.47 a month). However, this regulation would only apply to new leases. The Minister proposed the points system needs to be adjusted, awarding homes with good energy labels with more WWS points than homes with poor energy labels. Furthermore, the minister proposes to maximise rent increases in the non-regulated segment at wage increases in collective labour agreements (CAOs) plus 0.5%, rather than inflation. According to the Ministry, these new policy measures will be implemented from 1 January 2024.
In 2022, the owner-occupier market saw a turning point. Price developments for the owner-occupier market topped out in Q2 2022, followed by a decline of 5.8% in Q3 and 3.7% in Q4. The average house price stood at € 407,000 at the end of 2022, which was 6.4% lower than in Q4 2021 (source: NVM). Rising mortgage rates were the main driver of the decline in average house prices, due to their direct impact on the lending costs of consumers. Furthermore, consumers were more negative about the economic outlook and were therefore less willing to buy a new house. This was also reflected by the data on overbids. In Q4 2022, only 45% of homes were sold above the asking price, compared with 82% in Q4 2021. In 2022, the number of homes put up for sale increased significantly to approximately 34,700 in Q4 2022 compared with approximately 15,500 in Q4 2021. Another sign the market was less overheated in 2022.
In the rental market, demand was still outstripping supply in 2022 and as a result vacancy rates are relatively low. Average residential market rents increased by 6.5% year-on-year in Q3 2022 (data for Q4 2022 is not yet available). However, compared with the previous quarter, average rents declined slightly by 1.3%, a sign that market rents seem to have hit a ceiling. Due to inflation and surging energy prices, tenants are becoming more conscious about their housing costs and are therefore looking increasingly towards (sustainable) new-build homes.
As of July 2022, landlords were allowed to increase rents in the liberalised sector by a maximum of 3.3%. For 2023, the maximum increase is set to be 4.1%, which is the average wage increase in 2022 (3.1%) plus 1%.
Occupier key factors
Average selling price
Average rent by institutional investors (m2/month)
Investor appetite remained strong in almost all real estate sectors and the overall investment volume totalled € 17.4 billion, just short of the € 18.2 billion in the previous year. Investment volumes were strong in the first half of the year, fell back in the third quarter when the economic outlook turned more negative, and finished again with a strong final quarter, as investors wanted to close their deals before the increase in the real estate transfer tax from 1 January 2023.
The Dutch residential investment market saw € 4.0 billion in investments in 2022, compared with € 3.2 billion in 2021 (data JLL). This steep increase was driven by the greater supply of existing and larger portfolios being brought to the market, as a result of the so called denominator effect. Investors acknowledged the strong (demographic) fundamentals on the Dutch residential market. However, market sentiment is negative at the moment, due to the increase in interest rates, high inflation, the rising prices of construction materials and the above-mentioned proposed new stringent regulations for a part of the liberalised rental segment. This also affected prime net initial yields. Prime net initial yields were stable in the first half of 2022 and substantially increased by 65 basis points in the second half of 2022, according to JLL, and were standing at 3.60% at the end of 2022.
Investor key factors
Prime net initial yields
Investment volumes (€ bln)