Rent falls nationally in the Dutch unregulated housing sector

Fewer and fewer rental properties available to new tenants

Pararius quarterly rental report Q4 2022

The average price per square metre of a rental home in the unregulated housing sector in the Netherlands fell by 1.1 percent in the fourth quarter of 2022 compared to a year earlier. Shell and furnished rental homes rose in price, while the price of upholstered homes went down. Compared to a year earlier, the number of unregulated sector rental properties that became available to new tenants in the Netherlands fell by 8.9 percent.

Compared to a year ago, the national price per square metre in the Netherlands fell by 1.1 percent. New tenants paid an average of € 16.59 per square metre per month in the unregulated sector. The development of rent in rural areas shows a downward trend from the start of 2022. On the other hand, at the urban level - particularly in medium-sized and large cities - mainly increases in price have been observed.

For several quarters in a row, a downward trend has been observed in the number of rental properties that have become available to new tenants in the Netherlands. Compared to a year before, the number of unregulated sector rental homes made available fell by 8.9 percent.

Delivery forms in the Netherlands

Pararius distinguishes three delivery forms: shell¹, upholstered² and furnished³. Unregulated sector rental properties that were rented out furnished in the Netherlands were 1.8 percent more expensive in the fourth quarter of 2022 than a year before. Shell homes are the cheapest per square metre, with the average price per square metre rising by 0.5 percent (€14,31) in this segment. Upholstered properties fell in price; new tenants paid 3.5 percent less than a year before (€15,70).

Provinces of the Netherlands

Every quarter, Pararius looks back on developments at a provincial level. Since the first quarter of 2022, rents have plateaued in all Dutch provinces.

In North Holland, South Holland and Utrecht - below shown as Randstad provinces - the average price per square metre increased by 5.2 percent, 3.2 percent and 1.7 percent respectively. With a price per square metre of € 21.80, North Holland is the only Dutch province with a price of over €20 per square metre. In South Holland (€17.06) and Utrecht (€17.44) the average price per square metre is around €17.

In the southernmost province of Limburg (€12.72), rents in the unregulated sector rose at the same rate as the previous year, and in North Brabant (€14.91) the average price per square metre for new tenants rose by 1.7 percent. The price increases in Zeeland (€12.71) and Gelderland (€13.33) were slightly higher: new tenants paid 4.3 percent and 3 percent respectively more  than a year before.

The rental prices of unregulated sector rental homes in Flevoland are edging closer to the national average. New tenants there paid 2.9 percent more than a year earlier in the fourth quarter of 2022; € 16.07 per square metre per month. In the northernmost province of Groningen (€14.73), the average price per square metre barely rose by 0.4 percent. In Friesland (€11.58), Drenthe (€11.08) and Overijssel (€12.24), the prices per square metre of rental homes in the unregulated sector are well below the national average.

Five largest cities

In the five largest cities in the Netherlands - Amsterdam, Rotterdam, The Hague, Utrecht and Eindhoven - the average price per square metre of homes in the unregulated housing sector rose. Amsterdam stands head and shoulders above the rest this quarter, both in terms of price per square metre and percentage price increase. Rents in the capital rose by 10.9 percent, which equates to a price of € 25.75 per square metre per month for new tenants.

Jasper de Groot, CEO of Pararius: “In large cities such as Amsterdam and Rotterdam, the rental offering is declining rapidly. The market informs us that many private landlords currently feel compelled to sell their rental property/ies because letting properties will soon no longer be profitable.” At the same time, demand is only increasing. “This means that prices at the urban level are rising sharply,” says De Groot.

In the centre of Amsterdam, the average price per square metre of a rental home in the private sector rose by 8.5 percent; new tenants paid € 28.26 per square metre per month. In all other boroughs of  Amsterdam - Nieuw-West (+13.9%), Noord (+10.5%), Oost (+12.6%), West (+9.4%), Zuid (+9.8 %) and Zuidoost (+10%) - rents rose by more than 9 percent. In Zuidoost, the price per square metre is still below twenty euros: new tenants paid € 19.95 per square metre per month in the fourth quarter of 2022.

The rental offering in Amsterdam is rapidly declining. However, the high demand for rental homes in the capital remains, and may even have increased due to the arrival of many new expats.⁴ De Groot: “What is happening in Amsterdam shows market forces at work: supply and demand are getting increasingly out of balance, which may cause prices to rise. In addition, the market tells us that many investors are currently withdrawing from Amsterdam and selling their rental properties, which explains the declining rental offering.”

Realestate agent Ot de Boer of Van Huis Uit Makelaars Amsterdam is also seeing a significant reduction in the number of rental homes on offer. “High interest rates, fiscal changes and the many planned and already implemented regulations mean that less and less is being invested in rental properties in Amsterdam and that private landlords are selling vacated rental homes as a precaution.” In addition, according to de Boer, little is being built or developed, while demand remains high. “The search behaviour of tenants is also changing. People are now asking for an energy label or looking for well-insulated rental homes much more often.”

In The Hague (€17.85), Rotterdam (€17.50) and Eindhoven (€17.91), the rents of vacant unregulated sector homes also rose in the past quarter. In The Hague, rents rose by 5.9 percent, in Rotterdam by 2.3 percent and in Eindhoven new tenants paid 6.7 percent more.

In Utrecht, a rented home in the unregulated housing sector cost € 19.30 per square metre per month in the fourth quarter of 2022. That is 1 percent more than a year before.

Rotterdam

In Rotterdam Centre the average price per square metre rose by 4.6 percent compared to a year earlier. The borough is also the most expensive per square metre: € 19.85. Compared to 2021, rents also increased in the neighbourhoods of Prins-Alexander (+5.2%), Delfshaven (+6.2%), Feijenoord (+4.6%), Charlois (+5.2%), IJsselmonde (+3.5%) and Hillegersberg-Schiebroek (+1.7%). In Kralingen-Crooswijk (-0.4%) and Rotterdam Noord (-2%) rents fell in the unregulated sector.

Medium-sized cities

In the fourth quarter of 2022, a percentage drop in prices was measured in multiple medium-sized cities. For example, the rental price of an unregulated sector home in Lelystad fell by 8.6 percent, which for new tenants amounted to a price of € 14.32 per square metre. In Nieuwegein (-3.4%), Sittard (-2%), Vlaardingen (-4%), Wassenaar (-2.2%), Zaandam (-1.9%), Zeist (-2.4% ) and Zwolle (-2.9%), the average price per square metre of homes in the unregulated housing sector also fell.

High rent increases were observed in many medium-sized cities near Amsterdam compared to a year ago. This was the case in Amstelveen (+10.1%), Beverwijk (+15.7%), Diemen (+20.7%), Heemstede (+12.8%) and Hoofddorp (+24.5%). These cities often offer an affordable alternative to Amsterdam, even though the price per square metre in these cities is still above the national average. In Amstelveen, a new rental home in the unregulated sector cost an average of €21.46 per square metre per month in the fourth quarter. Diemen (€19.69), Heemstede (€19.08) and Hoofddorp (€19.47) are also moving towards twenty euros per square metre per month. In Beverwijk, new tenants paid € 16.64 per square metre per month.

Home types in the Netherlands

Compared to a year earlier, new tenants paid 0.2 percent more for a flat (€17.77). A single-family house (€13.32) cost 1 percent more in the fourth quarter of 2022 than in the previous year.

Area segments in the Netherlands

The vast majority of the unregulated sector rental homes listed on Pararius (70%) are smaller than 100 square metres. New tenants paid an average of € 20.44 per square metre per month (+1%) for a home smaller than 75 square metres, and for a home between 75 and 100 square metres this was € 16.04 (+0.7%) . The price of rental properties between 100 and 125 square metres rose by 1.6 percent (€13.92).

Pararius notes a decreasing trend in the number of newly released rental properties in the unregulated housing sector in the Netherlands. This has led to rising rents in large cities, because supply and demand have become even more unbalanced. De Groot: “The unregulated sector rental market is very cramped, with only 8 percent of the total housing stock, and that cramped situation will worsen further if the cabinet's plans to regulate the mid-rental segment go ahead.”

De Groot believes that the unregulated rental housing market fulfils an important function for middle incomes and the Dutch economy. De Nederlandsche Bank (DNB) also substantiates this in an analysis of the regulation of the mid-rental segment.⁵ According to DNB, the unregulated rental housing market acts as a “valve”. It is convenient for people who are not yet sure about their place of residence or their relationship as it offers the advantage of not being tied to an owner-occupied home. Moreover, tenants in the unregulated housing sector are more willing to move for work than households that rent socially or own their home. This enables them to respond more flexibly to changes in the labour market, which has a positive effect on the economy.

However, the Minister for Housing and Spatial Planning Hugo De Jonge wants to have 90 percent of all rented homes in the Netherlands fall under the housing valuation system, which means that homes that now belong to the unregulated sector will soon be added to the social housing stock. “At 32 percent, the Netherlands already has the highest number of social rental homes per household in Europe,” says De Groot. “Of these social rental homes, even 200,000 rental homes are currently occupied by scheefwoners (occupants whose incomes are too high for social housing) . These scheefwoners should be able to move on to a rental home in the unregulated sector, so that social rental homes can become available for people with a lower income. However, due to the current scarcity, rent in the private sector is too high for them and they decide to stay in their social housing.”

In addition, fiscal measures will negatively affect the return on rental housing and purchase protection will be introduced in many municipalities.⁶ De Groot: “We are already seeing a decrease in the rental supply in the unregulated sector due to landlords anticipating the measures and selling their rental properties. Further regulation and fiscal measures will not lead to more rental homes, but to fewer. ”

Regulating the mid-rental segment and the tax measures will have major consequences for the Dutch housing market. De Groot: “It is becoming less and less interesting for institutional and private investors to invest in the Dutch housing market. You cannot expect landlords to contribute to the creation of more homes if their incomes will be hit hard. It is counterproductive and will drastically damage the unregulated rental housing market.”

De Groot: “If there's one thing we shouldn't be looking for, it's an even larger social housing stock. That leaves little choice: social rental or purchase, but nothing in between. As a result, the composition of the Dutch housing stock is becoming virtually binary, which is bad news for the many middle-income earners who are already falling through the cracks. In Berlin and Sweden, attempts to regulate the rental housing market have failed miserably. Let's stop the Netherlands from heading for such a fiasco."

In London we see another example of what happens when investors drop out. A recent article in The Financial Times states that the British rental stock has remained mostly constant over the past seven years as housing construction remains below target and landlords sell off due to higher taxes and stricter regulation. A two-bedroom apartment in London currently costs 18 percent more than last year.⁷ De Groot: “Just like in the UK, Dutch housing production is creaking and groaning under the announced further regulation and fiscal measures. According to Statistics Netherlands, in 2022 only 48,100 homes to be built have been licensed so far. That’s 12 percent less than the year before. Architects are also seeing their commissions decline sharply. The writing’s on the wall."

According to Capital Value, growth in the Dutch housing supply will fall further in 2024 and 2025 to 40,000-50,000 homes.⁸ De Groot: “Investors do want to move forward in the Netherlands, but the destabilising market alone makes this incredibly complicated.”

The measures announced by Hugo de Jonge are not yet final. Consultation on the bill will take place this month and a report will be published on the accumulated measures. In addition, another report will be published on the tax measures that came into effect on 1 January. De Groot: “The Council of State still has to consider the law and a debate in the House of Representatives will occur in the spring. It's five minutes to midnight, but it’s not too late. I hope the tide will turn for all middle-income earners in the Netherlands.”

Explanation calculations

The figures in this rental raport are based on 23.327 homes that were removed in the fourth quarter of 2022 after being offered for rent online. The condition in which a home is rented out (shell, semi-furnished or furnished) and the type of rental home (apartment, single-family home, detached house) have a major influence on the average rent per square metre.

Looking at the distribution of the rental supply in the Netherlands, 23% of the total unregulated sector rental stock is let by institutional investors. These are mainly rental properties that are offered as a shell (without upholstery and furniture). The remaining 77% of the housing stock is let by private investors. These are rental properties that are mainly offered upholstered and/or furnished. The Pararius rent monitor is compiled on the basis of approximately 105,000 rental transactions in the unregulated sector on an annual basis. About 15% of the rental transactions in the rental monitor concern shell rental properties and 85% concern furnished and/or furnished rental properties, which corresponds to the distribution in the Netherlands. The composition and the Dutch coverage of these rental transactions provide a representative picture of the breakdown in the Dutch unregulated rental market. As a result, the rent monitor provides a reliable picture of rent development in the Netherlands.

All figures shown relate to rental properties that were offered in the Netherlands and that were removed in the relevant quarter, thus becoming available to new tenants. Only places where more than 30 measurements could be taken over the entire quarter were included in the calculations. Not included in the calculations were properties with a living area of less than 40 square metres or more than 300 square metres, or with a rent below €763.47 (liberalisation threshold from 1 January 2022 at 146 points). Rental properties offered with 'price on request' were also not taken into account in the calculations. In the calculation, no distinction was made between houses, apartments, detached houses, studios or rooms, unless stated otherwise.

Average rent per square metre per month

The rent per square metre per month is equal to the monthly rent divided by the living area (in m2) of the relevant home. The average rent per square metre is based on a harmonic mean of the rent per square metre of all homes over which the average is calculated. 

To mitigate the impact of outliers on the mean, the calculation of means is done over the values that fall between the 2nd and 98th percentiles (inclusive, calculated over full dataset).

In the above example, the area of all rental properties is between 40 and 300 square metres. None of the properties are given as price on demand. There is one property where the rental price per square metre is higher than the 98th percentile (€37.50) for this quarter: rental property 10. This rental property is not included in the calculation of the average, the other 9 properties are.

About Pararius

Pararius is the largest independent website for rental properties in the Netherlands. Pararius brings together tenants and landlords. Over 4,500 professional organisations advertise their available rental properties on Pararius. These organisations consist of real estate brokers, property management companies, developers and housing associations throughout the Netherlands. The website welcomes more than 2.5 million visitors every month. Visitors have free and unlimited access to the supply of over 70,000 properties. Pararius is multilingual and is also the largest expat rental platform in the Netherlands for the more than 350,000 expats working in the Netherlands.

This rental report is powered by Realstats.