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Dutch resi market frozen as regulatory squeeze looms

The threat of a further regulatory squeeze has frozen the Dutch residential property market, experts agreed at Real Asset Media’s Netherlands Investment briefing, which took place yesterday at Schroders Capital’s offices in London and online on the REALX.Global platform.

Pieter Willem Akkerman, Co-Head Real Estate, Netherlands, Schroders Capital

“The market has come to a standstill because of the uncertainty over what is happening,” said Pieter Willem Akkerman, co-head real estate Netherlands, Schroders Capital. “Almost all sale proceedings have been stopped over the summer and developers have also halted activity.”

The cause was the government’s announcement that it is preparing to regulate rents, not just in social housing but also in the mid-level segment, that encompasses monthly rents between  €752 and €1,050.

“The new rules mean that a current €1,800 rent for an apartment in Amsterdam will have to be lowered to around €1,100,” said Akkerman. “This clearly leads to a huge decrease in the value of the asset and will have a significant impact on the market, as it’s a disincentive to invest in resi.”

The Netherlands has one of the highest percentages of social housing in the world: 34% of resi assets are earmarked for people on low incomes or with special needs.

“What this country needs is more construction activity, not more regulation in what is already an extremely highly regulated market,” said Akkerman. “We need more mid-market housing because of population growth.”

Rogier Bos, Real Estate Finance Benelux, Berlin Hyp

Instead, a lot of building projects are being cancelled or are not getting off the ground at all. Tighter regulation can be the final straw for developers who are already dealing with rising construction and labour costs, a spike in land and energy prices and difficulties finding land and getting permits.

“The cranes are disappearing just as we need more houses being built,” said Rogier Bos, real estate finance Benelux, Berlin Hyp. “Clarity is key, because it’s very difficult to calculate returns at the moment. Our focus has not changed: we’re still very keen to finance resi, but there is less demand because of the legislation.” 

However, there is another side of the coin. 

“Regulated residential gives investors clarity,” said Bos. “It’s still rewarding to invest in resi development because we know that housing shortages will not be solved in the next ten years. There will be no lack of demand, so I would definitely keep investing and upgrading existing buildings.”

Another incentive for opportunistic investors is the fact that resi prices have fallen.

“Prices are going down quite significantly, even in Amsterdam, so investors with a long-term horizon are seizing the chance to buy resi properties at a 10-20% discount,” said Akkerman. “It will be extremely interesting to see how the Dutch resi market develops in 2023.”