Unregulated housing sector supply reduces further, rental prices increase

Rental supply shifts towards homeownership market

Pararius Quarterly Rental Report Q4 2023

The average square metre price of a rental home in the unregulated housing sector increased by 8.5 percent in the fourth quarter of 2023 compared to a year ago. New tenants paid €18.01 per square metre per month, as reported by the property portal Pararius. In comparison to the previous year, the number of rental homes in the unregulated housing sector available for new tenants has decreased by 15.6 percent. 

Shift towards homeownership market increases

During the fourth quarter of 2023, the percentage of properties in the market for sale originating from the rental market rose to almost 8 percent.¹ This means that 8 percent of all properties listed for sale were formerly rental properties. In the third quarter of 2023, this figure was still at 7 percent. This increase follows the trend that began in the fourth quarter of 2022 when an increasing number of private investors chose to sell their vacated rental properties instead of re-renting them. "The growing shift from rental to ownership, which has been felt by the market for some time, leads to a further reduction in the already scarce rental supply in the unregulated housing sector," says Jasper de Groot, CEO of Pararius.

The average nationwide square metre price in the Netherlands has never before exceeded eighteen euros. A year ago, the average cost of a rental home in the Dutch unregulated housing sector was €16.59 per square metre per month. De Groot stated, "What we see here is that in a market of supply and demand, the rental price is driven up when the rental supply decreases." Compared to a year earlier, the number of available rental homes in the unregulated housing sector for new tenants in the Netherlands has decreased by 15.6 percent.

Five Largest Cities in the Netherlands 

The five Dutch largest cities - Amsterdam, The Hague, Eindhoven, Rotterdam, and Utrecht - were responsible for 44 percent of the total rental supply offered on Pararius in the fourth quarter of 2023. In the fourth quarter of 2022, 40 percent of the total rental supply still consisted of offerings in these five largest cities. The market share of the five largest cities in the Dutch unregulated housing sector is increasing because the number of homes becoming available for new tenants outside these cities is currently decreasing more significantly.

Responses to available rental properties

In the fourth quarter of 2023, a rental property could expect an average of 18 responses from prospective tenants. This includes responses via email and phone. This represents a 14 percent decrease compared to the fourth quarter of 2022. However, compared to 2021, the number of responses significantly increased. Throughout 2023, rental homes in the unregulated housing sector received approximately 160 percent more responses than in 2021.

The largest Dutch cities show a nearly identical pattern. There too, the number of responses has increased enormously over the past two years. During the last quarter, in four out of the five largest cities, the average number of responses to a rental property decreased compared to the same quarter last year. Only in Rotterdam did this number increase by 28 percent.

Rental price development in major cities

In comparison to a year ago, the average square metre price increased in four out of the five largest cities in the Netherlands. Only in Eindhoven, where a rental property cost an average of €17.67 per square metre per month in the last quarter, did the square metre price decrease by 1.4 percent.

Daniëla Walraven from Goeth Vastgoed noted that there have been fewer responses to available rental properties in Eindhoven in recent months. "There's less activity in terms of phone and email communication. This could be related to the time of the year, but the declining employment in the high-tech industry in Eindhoven could also play a role," said Walraven.

The largest percentage price increase was observed in Rotterdam (€19.18), where new tenants paid 9.6 percent more than in the fourth quarter of 2022. In Amsterdam (€27.28), The Hague (€19.35), and Utrecht (€20.17), the square metre price increased by 5.9 percent, 8.4 percent, and 4.5 percent, respectively.

Delivery forms in the Netherlands

Pararius distinguishes three delivery forms: shell², upholstered³ and furnished⁴. Unfurnished rental homes in the Netherlands saw a 15 percent increase in square metre price in the fourth quarter of 2023, with new tenants paying an average of €16.46 per month. For a furnished home, a new tenant paid 11.1 percent more than a year ago (€22.15), and for a semi-furnished home, the increase was 6.8 percent (€16.77).

Housing types in the Netherlands

In the fourth quarter of 2023, the average square metre price for apartments and single-family homes in the Netherlands increased by 7.4 and 7.3 percent, respectively, compared to a year ago. New tenants paid €19.09 per square metre per month for an apartment and €14.29 per square metre per month for a single-family home.

Size segments in the Netherlands

Rental properties in the smallest size segment (less than 75 square meters) cost an average of €22.21 per square metre per month in the fourth quarter of 2023. This represents an 8.6 percent increase compared to a year ago. The square metre price for larger rental properties in the Netherlands remains below twenty euros. New tenants paid €17.37 for a rental home between 75 and 100 square meters (+8.3%) and €15.02 for a rental home between 100 and 125 square meters (+7.9%). The average rent for a rental home between 125 and 150 square meters increased by 8.3 percent in the fourth quarter of 2023, with new tenants paying €14.30 per square metre per month.

Provinces

On a provincial level, percentage price increases were observed across the board in the fourth quarter of 2023. The largest percentage price increases were measured in Groningen (+16%), Drenthe (+14.5%), and Overijssel (+12.5%). In these northern Dutch provinces, new tenants paid €17.09, €12.69, and €13.76 per square metre per month, respectively.

In the other northern Dutch provinces, the square metre price of an unregulated housing sector  rental home also increased compared to a year ago. In Flevoland, new tenants paid 2.2 percent more (€16.42), in Gelderland, the increase was 6.3 percent (€14.17), and in Friesland, new tenants paid 5.7 percent more than in the fourth quarter of 2022 (€12.25).

In the so-called Randstad provinces⁵, the average square metre price is significantly higher. The average square metre price in Noord-Holland (€23.55) and Zuid-Holland (€18.50) is higher than the national average. Rental prices in these Dutch provinces increased by 8.1 and 8.4 percent, respectively, compared to a year ago. In the province of Utrecht, new tenants paid 2.6 percent more than a year ago; rental homes cost an average of €17.88 per square metre per month.

For the provinces in the southern part of the Netherlands, percentage price increases were also observed in the fourth quarter of 2023 compared to a year ago. In Zeeland (€13.13), new tenants paid 3.3 percent more, in Noord-Brabant (€15.77), this increase was 5.8 percent. In Limburg, the average square metre price increased by 5.2 percent, with new tenants paying €13.37 per square metre per month.

Medium-sized Dutch cities

Pararius also reports information on rental price developments at the local level in the Netherlands. This information concerns places where more than 30 unregulated housing sector  rental homes were offered during a quarter. The data indicates that in almost 80 percent of the 60 places, the average square metre price of rental homes in the unregulated housing sector increased during the fourth quarter of 2023.

Price decreases occurred in places such as Hoofddorp (-4.7%), Vlissingen (-3.7%), Amersfoort (-3.9%), and Heemstede (-2.8%). In total, a percentage price decrease was measured in 13 medium-sized cities.

The largest percentage price increases were observed in places like Deventer (+18.8%), Roermond (+16.6%), Delft (+16.2%), Hengelo (+14.5%), and Groningen (+13.8%).

Even more imbalance due to shrinking supply

The decrease in the supply of rental homes in the unregulated housing sector, leading to rising rental prices in that sector, has significant consequences for the Dutch housing market. Currently, the housing stock consists of 8 percent unregulated rental homes, 32 percent social rental homes, and 60 percent owner-occupied homes. "The importance of a healthy supply in the unregulated housing sector cannot be emphasized enough," said De Groot. "Eight percent is far too little to serve as an outlet for people who are not eligible for social housing and are not willing or able to buy. The demand is much greater than the supply."

Private investors are responsible for housing nearly 2 million people in the Netherlands. They rent out social housing as well as homes in the unregulated housing sector, playing a tremendously significant societal role. However, these private investors are choosing more often to sell vacant rental properties instead of re-renting them. This decision is affected by various factors, including rising interest rates, stricter regulations, and an increase in tax burdens.

De Groot states, "Many private investors see their returns disappearing before their eyes; renting out is no longer profitable with the accumulation of measures." Real estate agent Walraven in Eindhoven also observes that smaller investors are more frequently selling their properties. "Recently, we visited a property with an owner and went through the points system of the Rental Valuation System.⁶ It turned out that he would see a significant decrease in his returns if he is going to rent it out taking into account the points system. If an investor also has a high mortgage on such a property, renting it out is often no longer feasible."

At first glance, this may seem positive for, for example, first-time homebuyers. More homes available for purchase should theoretically create more opportunities for them. However, according to De Groot, "The reality is more complex. The impact on the unregulated rental market is much greater than the impact on the homeownership market. The unregulated rental market is 8 times smaller than the homeownership market, so the shift of homes to the homeownership market has drastic consequences for the rental prices of the remaining homes. On the other hand, the increase in the number of properties for sale from the unreguatled rental market hardly affects purchase prices in the Netherlands, which continue to rise. Moreover, many first-time buyers, even with a median income, find it difficult to finance a home purchase. The average house price in the Netherlands is often much higher than the maximum mortgage that first-time buyers can obtain. This keeps the dream of owning a home out of reach for many: once again, first-time buyers are reliant on the unregulated housing sector, where the supply is decreasing and, as a result, rental prices are rising sharply. A lose-lose situation."

De Groot emphasizes, "Private investors play a crucial role in providing housing stock in the Netherlands. It is a misconception to think that every private investor is a negligent landlord. Many private investors, like large pension funds, invest in real estate as a way to secure their retirement, and the vast majority of them are involved and responsible landlords. They provide housing for various groups, including first-time buyers, those who seek flexible living, and others who do not qualify for social housing. Their contribution to the housing market is invaluable and contributes to a dynamic and diverse housing stock. In my opinion, we should strive for a housing market that accommodates both renters and buyers, first-time buyers, and those moving up the property ladder. Preserving and encouraging supply in the unregulated housing sector is not only crucial for individual renters or landlords but for the entire society."

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 rental report are based on 18,935 homes that were removed in the first quarter of 2023 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 quarterly rental report 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 quarterly rental report 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, thequarterly rental report 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 €808,06 (liberalisation threshold from 1 Juli 2023 at 136 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, it is noted that the surface area of all rental properties falls between 40 and 300 square metres. None of the properties are listed with a price upon request. There is one property where the rent 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, while the other 9 properties are.