Effect on the investment market
As was the case in Berlin, regulation of the Dutch housing market can affect the markets for existing properties and new developments. Indeed, the prevailing uncertainty means it is already possible to gauge the effect on new developments.
Investment in new rental properties in the periods 1 January - 19 May and 19 May - 30 September
Since the rent regulation was announced on 19 May 2022, there has been a dramatic drop in the amount invested in new developments. Over the past few years - since the Authorised Institutions for Social Housing Reform Act - investment volume has averaged €876 million between 19 May and 30 September, but in 2022 this amount dropped to €482 million. This translates into a substantial negative impact on new developments. Neprom has previously noted that the annual number of new homes could drop to a maximum of 50,000 as a result of the announced rent regulation versus a planned level of 100,000 residential properties.
This shift in new developments is not the only repercussion of the new regulation. A drop in structural investment in certain segments of the rental market, such as small-scale new developments up to 60-70 sq m, is also expected in the long term. Lower rental income will mean that these types of regular housing products are no longer financially viable for investors.
Investors will be much more inclined to seek alternative types of properties, such as lifetime care homes, student accommodation or Living as a Service (LaaS). Demand is high for these types of properties and they are often unaffected by rent regulation. Under certain circumstances lifetime homes are eligible for an increase in WWS points (35%), ensuring that they are excluded from the regulated segment.
Yet we can still conclude that investors will invest considerably less in the Dutch housing market. Moreover, the question is to what extent housing corporations will be able to take over this role, given the immense amount of investment they themselves face in modernising existing properties and making them more sustainable.
