Rental prices in the Netherlands continue to rise 

Meanwhile rental supply diminishes in major Dutch cities

Pararius Quarterly Rental Report Q2 2023

In the second quarter of 2023, the five largest cities in the Netherlands saw a 27 percent decrease in the number of rental properties offered compared to a year ago, according to property portal Pararius. The average price per square metre in the unregulated sector increased by 5 to almost 8 percent in these cities.

Since the implementation of the WOZ cap (government measure) in May 2022, the number of rental properties being offered in the five largest cities has drastically declined compared to the overall supply in the Netherlands, while the demand is actually increasing. National and international real estate experts consider this a clear indication of what is to come if further regulation of mid-tier rentals takes place.

The five largest cities in the Netherlands - Amsterdam, The Hague, Eindhoven, Rotterdam, and Utrecht - accounted for 39 percent of the total rental supply offered on Pararius in the second quarter. In the second quarter of 2022, the G5 cities represented 46 percent of the supply, and in 2021, it was as high as 55 percent.

In all five of these Dutch cities, the average price per square metre increased compared to a year ago. In the capital city of Amsterdam (€26.55), new tenants paid 7.6 percent more for a rental property in the unregulated housing sector, while in The Hague (€18.57) and Rotterdam (€18.64), the average price per square metre increased by 7.3 percent. In Utrecht (€21.08) and Eindhoven (€18.24), the price per square metre rose by just over five percent compared to a year ago, with new tenants paying 5.1 and 5.8 percent more, respectively.

According to Jasper de Groot, CEO of Pararius, the decrease in the number of rental properties offered in the Netherlands is not surprising. "This is a direct result of the accumulation of measures taken and planned by the government to improve the Dutch housing market. The decline in available rental properties started around the implementation of the WOZ cap in the housing valuation system, which caused many properties in the unregulated housing sector to fall back into the social sector. Rental properties that became available due to tenants leaving were often not re-rented but sold instead. This situation is disadvantageous for tenants who cannot find housing in the social rental market and do not want or cannot buy a property."¹ The rental supply has been particularly declining sharply in the five largest cities of the Netherlands since the introduction of the WOZ cap. In the second quarter of 2023, there were 27 percent fewer rental properties offered in these cities compared to a year ago.

In recent years, the number of applications received through Pararius for available rental properties in the Netherlands has significantly increased. The pressure on the unregulated rental market has particularly intensified, especially in the largest cities.

Esther Raven from Stad en Land NVM Makelaars confirms that the number of responses received for a newly listed property is excessively high, even in the city of Rotterdam. "We recently took down a furnished 3-room apartment from the internet within a few hours," she states. The property was listed at around €1,100, and within a few hours, more than 200 responses were received. "The supply is scarce, and the demand is very high, so these kinds of situations are not uncommon." According to Raven, properties that will no longer exceed the point count in the Netherlands are increasingly being sold. Additionally, the fact that rental properties are now taxed under box 3 starting this year discourages many landlords. "Renting out is no longer profitable," says Raven.

Average Dutch square metre price

On the national level, the average price per square metre of rental properties in the unregulated housing sector in the Netherlands has increased by 0.4 percent compared to last year. New tenants paid an average of €17.10 per square metre per month. In comparison to the previous year, the number of available rental properties in the unregulated housing sector for new tenants has decreased by 12.8 percent. Nationally, it appears that rental prices are rising less rapidly. However, this is due to a significant decrease in the more expensive supply in the G5 cities as part of the total, which makes the cheaper supply outside these cities have a greater impact on the average than in previous periods.

Delivery forms in the Netherlands

Pararius distinguishes three delivery forms: shell², upholstered³ and furnished⁴. In the second quarter of 2023, the rental price of unfurnished properties in the unregulated housing sector decreased by 3.5 percent. New tenants paid an average of €14.49 per square metre per month. The square metre price for furnished and semi-furnished properties increased; new tenants paid 2.4 percent more than a year ago for a furnished property (€20.37) and 0.3 percent more for a semi-furnished property (€16.16).

Housing types in the Netherlands

New tenants paid 2.2 percent more for an apartment in the second quarter of 2023 compared to the second quarter of 2022. An apartment in the  unregulated housing sector had an average cost of €18.40 per square metre per month. A single-family home (€13.72) cost 0.7 percent less in the second quarter of 2023 compared to a year ago.

Size segments in the Netherlands

Rental properties in the smallest size segment (less than 75 square metres) had an average cost of €21.27 per square metre per month in the second quarter of 2023. That is a 4 percent increase compared to a year ago. Larger rental properties had a price per square metre below twenty euros. For instance, new tenants paid €16.76 for a rental property between 75 and 100 square metres (+3.5%) and €14.39 for a rental property between 100 and 125 square metres (+0%). The average rent for a rental property between 150 and 175 square metres decreased by 2.9 percent in the second quarter of 2023: new tenants paid €13.99 per square metre per month.

In the second quarter of 2023, the highest number of responses was received for small-sized homes. As the size of a home increases, and typically falls into a higher price range, the average number of responses decreases. For every size segment, it is evident that market demand has significantly increased over the past three years.

Provinces

Only the province of North Holland still has a square metre price above twenty euros. New tenants in this province paid €22.47 per square metre, which is 3.2 percent higher than a year ago. In Utrecht and South Holland, rental prices for homes in the unregulated housing sector increased by 1.7 and 5 percent, respectively. The rental prices in these provinces are higher than the national average of €17.10. These provinces together form the Randstad region covering a large area including four large Dutch cities: Amsterdam, Rotterdam, The Hague, Utrecht, and their surrounding areas. In Utrecht, the average cost per square metre for a rental property was €18.13, while in South Holland, it was €17.80. It is the first time that the square metre price in the province of Utrecht has exceeded eighteen euros.

In the northern provinces of the Netherlands, the square metre prices are below the national average. In Drenthe (€11.51), the square metre price decreased compared to a year ago, and new tenants paid 2.9 percent less. 

In Flevoland, a rental property in the unregulated housing sector had an average cost of €16.14 per square metre per month, which is 5.8 percent more than last year. In Friesland (€11.38) and Groningen (€15.81), the square metre price increased by 3.9 and 1 percent, respectively.

For a property in the province of Overijssel (€13.09) and Gelderland (€13.14), new tenants paid an average of 4.7 and 0.9 percent more, respectively, compared to a year ago.

Rent increases were also observed in the southern provinces of the Netherlands. The rental prices in North Brabant (€15.12) were relatively close to the prices of the previous year in the second quarter of 2023, with new tenants paying 0.2 percent more. In Limburg (€13.69) and Zeeland (€13.25), the average square metre price increased by 4.6 and 3.2 percent, respectively.

Medium sized cities

Pararius not only reports macro figures but also provides information on rent price developments at a local level. This information covers locations where more than 30 rental properties in the private sector were offered during a quarter. The data shows that in nearly 80 percent of the 70 locations, rental prices in the private sector increased during the second quarter of 2023.

In terms of percentage, the rental prices rose the most in places such as Vlissingen (+13.9%), Nieuwegein (+13.3%), Diemen (+12.3%), Almere (+11.2%), Maastricht (+10.6%), Leeuwarden (+9%), Almelo (+8.7%), and Deventer (+8.4%).

In some medium-sized cities, price decreases were observed in the second quarter of 2023. These include Hoofddorp (-4.4%), Middelburg (-6%), Roosendaal (-8.7%), Dordrecht (-3.2%), and Zwolle (-3.5%).

Housing seekers find themselves in dire straits 

New laws and regulations for the housing market were still on the agenda in the second quarter of 2023. The Dutch Parliament, for instance, approved an initiative law proposed by The Labour Party (PvdA) and The Christian Union (ChristenUnie) to ban temporary rental contracts.⁵ While this measure may seem favorable for housing seekers, according to De Groot, it also has adverse effects. "We are reverting back to the situation before 2016 in the largest cities, where expats are preferred over Dutch tenants. Expats usually move again after two to three years, giving landlords more freedom to dispose of their properties."

Due to international business tax advantages, expats generally have more financial resources at their disposal, and they may even have the ability to outbid others on rental prices, which is no longer uncommon in today's rental market.⁶ De Groot explains, "In the past, real estate agents used to schedule one-on-one appointments with interested parties. Nowadays, a real estate agent may receive up to 250 applications for a single property, of which only around 15 are invited for a viewing session, and then they compete against each other to secure the rental property. This is what happens when the supply of private sector rental homes is so scarce. Dutch housing seekers are still being left out in the cold in the private sector rental market. With sufficient supply, in principle, people should be able to quickly find a rental home."

Real estate experts have been pointing out the negative consequences of government-imposed measures on the rental supply in the private sector for quite some time now. The European Commission has also recently expressed its concerns in the annual recommendation regarding the Dutch economy.⁷ These measures drastically reduce the flexible segment, the private rental sector, leaving people with only the choice between buying a home or renting a social housing unit. De Groot states, "Both options are undesirable and inaccessible for middle-income individuals for various reasons. There are long waiting lists for social housing. Opting for homeownership also seems to be becoming less attainable for many people. High purchase prices and rising mortgage interest rates force many housing seekers in the Netherlands to shift their focus from buying to renting. These are often individuals who are then reliant on the private sector because their income is too high for social housing. As a result, there is an increasing demand for a shrinking supply."

To give people with lower incomes a better chance of obtaining housing, a recent amendment to the Housing Act was approved, allowing municipalities to require homeowners to sell their properties only to individuals with lower or middle incomes. This amendment applies only to newly built homes, while existing homes for sale are exempt.⁸ According to De Groot, this change has a negative effect on housing production. "It may seem positive that property developers can only sell newly built homes to individuals with a lower or middle income, but in reality, this means that investors can no longer count on realistic returns. They will have to factor in lower returns, which further diminishes motivation for the massive national construction challenge of adding 900,000 extra homes by 2030."

The motivation behind these measures is deemed crucial by the government. The Dutch government states that it must "remain attractive to invest in middle-income rental homes."⁹ However, the accumulation of these measures makes investing in rental properties less appealing for private investors. If the plan to regulate middle-income rentals proceeds, a significant portion of the private sector will fall under regulated housing from 2024 onwards. Additionally, homeowners are encouraged to make their properties more sustainable. Starting in 2030, homes with an energy label of E or lower will not be allowed to be rented out at all.¹⁰ De Groot explains, "The costs of making a rental property sustainable are high and can hardly be recovered by landlords. Many investors will choose to sell vacant rental properties instead of making them sustainable and renting them out because renting is no longer profitable. These measures will eventually lead to a decrease in affordable rental homes and a reduction in the sustainability of rental properties."

"Hugo de Jonge, Minister for Housing and Spatial Planning, seems unwilling to recognize that the unilateral accumulation of measures will have disastrous consequences for market mobility and the economy, leading to a halt in labor mobility," adds De Groot. "This approach eliminates the concept of a free market, and an even larger portion of Dutch housing seekers will fall through the cracks. It is incomprehensible that the focus is so strongly on the private rental sector, which accounts for only 8 percent of the total Dutch housing stock. Only 3 out of 100 homes are rented out at a price above €1,000 per month. The cure is worse than the disease."

Furthermore, according to De Groot, all these measures are solely aimed at improving the situation for tenants without considering the downside for landlords. Landlords play a significant social role, providing housing for approximately 2 million Dutch citizens.¹¹ "There should be much more focus on creating a healthy flexible segment. These measures may seem favorable to tenants, but they are being misled. Instead of increasing the supply, the existing supply is being redistributed, benefiting only a few tenants while a larger group of potential tenants misses out completely. As a result, the problems in the housing market will only worsen."

About Pararius

About Pararius Pararius is the largest independent housing platform in the Netherlands. Only professional brokers including NVM, VBO, VastgoedPRO, housing corporations, administrators, investors, and developers can present their available housing supply on the platform. This offer is registered by more than 4,500 rental and sales specialists on Pararius, ensuring high quality and up-to-dateness. The website welcomes over 2.5 million visitors each month. These visitors have free and unlimited access to an offer of over 60,000 properties. Pararius is available in six languages and, for the more than 350,000 international knowledge workers employed in the Netherlands, it is also the largest expat rental platform in the country.

Explanation of calculations

The figures in this rent monitor are based on 22,394 properties that were signed off in the second quarter of 2023 after being offered for rent online. The condition in which a property is rented (bare, semi-furnished, or furnished) and the type of rental property (apartment, single-family home) greatly affect the average rental price per square metre.

Looking at the distribution of rental supply in the Netherlands, 23% of the total private sector rental stock is rented out by institutional investors. These are primarily rental properties that are offered bare (without upholstery and furniture). The remaining 77% of the housing supply is rented out by private investors. These are rental properties that are mainly semi-furnished and/or furnished. The Pararius rent monitor is compiled based on approximately 105,000 rental transactions in the private sector annually. About 15% of the rental transactions in the rent monitor are bare rental properties, and 85% are semi-furnished and/or furnished rental properties, which corresponds to the distribution in the Netherlands. The composition and the Dutch coverage of these rental transactions give a representative picture of the breakdown in the total Dutch private sector rental market. As such, the rent monitor provides a reliable image of the rent price development in the Netherlands.

All the figures shown relate to rental properties that were offered in the Netherlands and were signed off in the relevant quarter, thereby becoming available for new tenants. Only locations where more than 30 measurements could be taken throughout the quarter were included in the calculations. Rental properties with a living area smaller than 40 square metres and larger than 300 square metres or with a rent price below € 808.06 (liberalized limit from January 1, 2023 at 149 points) were not included in the calculations. Also, rental properties for which the price was given as 'price on request' were not included in the calculations. The calculation did not distinguish between homes, apartments, detached homes, studios, or rooms, unless otherwise specified.

Explanation of average number of responses per property calculation

The average number of responses is calculated by dividing the total number of sent responses per period (month/quarter) by the total number of properties for which a response was sent in the respective period. Because the calculation looks at the moment when the responses were sent, responses from the same property (but sent at different times) can be counted in multiple periods. The calculation indicates how many responses have come in for a property within a time period (month/quarter) via digital request forms on Pararius. Responses by phone are also included. The total number of responses that come in for a property can be larger when looking at a longer period.

Average rental price per square metres per month

The rental price per square metre per month is equal to the monthly rental price, divided by the living area (in m2) of the respective property.

For the average rental price per square metre, a harmonic average of the rental price per square metre of all properties over which it is calculated is used.

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

This rental report is powered by Realstats.