The rental residential sector is likely to be the main driver of value growth for real estate investors in 2025, says Jeroen Beimer, head of research at Holland Metropole partner Bouwinvest.

“Inflation and the accompanying interest rate policy have significantly impacted the real estate market in recent years, leading to declining valuations,” says Jeroen. “Inflation has decreased somewhat but the inflation level in the Netherlands remains relatively higher than in our surrounding countries.”

The current global geopolitical situation makes the economic outlook uncertain, and Jeroen expects that this will dampen the anticipated recovery in the Dutch real estate market. In addition, ECB interest rate cuts are not a certainty, he says, and for the Dutch real estate market, this could mean that initial yields will see little movement.

“The primary driver of value growth will therefore be rental growth, particularly in segments with strong demand and limited supply, such as the housing market,” says Jeroen.

“Real estate, with its stable cash flows, has shown itself to be a good hedge against inflation in recent years, and we expect this to remain the case. For a long-term investment horizon, 2025 could be a good ‘vintage year’ for real estate investments. We also anticipate a gradual increase in investor interest.”

Although Beimer expects only limited interest rate cuts, he does see opportunities for yield compression in niche segments of the housing market that are currently underdeveloped. Sectors such as student housing and private residential care, he says, show above-average growth potential and therefore offer an attractive risk-return profile.

“From the demand side, the Dutch housing market, including healthcare real estate, has strong underlying fundamentals and should be attractive to investors,” he says. “At the same time, the Dutch housing market is not unique in this regard. It is a European phenomenon, and the Netherlands is competing for capital with other European markets.”

One problem facing the Dutch market is that of uncertainty about regulations and unfavorable tax measures. The Netherlands needs to build approximately 1 million homes by 2034, and this is going to cost some €400 billion in capital.

“Our message to the national government is clear: ensure consistent policies and an investment climate that is attractive to capital, both nationally and internationally,” Beimer says.

Photo: Bouwinvest 

Dutch housing minister Mona Keijzer has published new rules to speed up residential housing development in the Netherlands, including placing restrictions on the right to appeal and making it easier to build in rural areas.

The aim of the measures is to ensure that enough affordable housing is built, that procedures are shorter, and that everyone has an equal chance of getting a home, the minister said.

The legislation, Keijzer said, will “provide legal instruments for government and local authorities to work more quickly with the private sector in building both sufficient and the right kind of housing. It is also important to ensure that people with an average income have the opportunity to find an affordable home in every local authority area.”

Cutting red tape

Current planning rules state that applications for new residential locations should be supported by evidence that there is a need for housing in that particular place, limiting development outside current town and city boundaries.

This procedure requires additional research, time, and costs and will therefore be scrapped, the minister said, adding that this will make it quicker and easier to build outside existing urban areas.

In an effort to cut down on protests, protesters will only be allowed one legal appeal instead of two in projects of more than 12 units, and the ruling must be made within six months, the minister said.

30% social housing

The new rules also state that two-thirds of new builds in the Netherlands should be accessible to people on low and average incomes and that 30% should be social housing on a regional rather than a project basis. This was agreed at December’s housing summit between the government, developers and investors and marks a shift in the current project-based percentages.

The rules also make it easier for homeowners to build a “granny flat” on their property without a permit and simplify the regulations for sustainable construction.

Affordability a challenge

“The measures are a step in the right direction, but still more can be done,” said Dutch developers’ organisation Neprom in response. In addition, affordability remains a challenge, Neprom said.

“The agreement that two-thirds of new developments should be classed as ‘affordable’ is becoming increasingly difficult to realise,” Neprom said. “What does help is that planning procedures are now being made uniform and agreed at a regional level.”

Photo: Depositphotos.com

Holland Metropole member Bouwinvest plans to invest €1 billion in housing in the Netherlands over the coming years to increase the supply of affordable and sustainable homes.

“We are able to do this thanks to our shareholders, the Dutch pension funds,” says Paul van Stiphout, Fund Manager Dutch Residential Investments. “Capital can be fickle, but a stable, high-value shareholder base allows us to plan for the future.”

Shareholders seek a return on investment of 5.5% to 7% by developing sustainable homes in the mid-market sector and just above, Paul says. “We can improve affordability in the long term by increasing housing supply. We will also sell older properties to fund new construction. We’ve agreed at least 50% of our capital will go to new builds, ensuring growth in the total housing stock.”

One million new homes

However, additional capital is needed to fully address the housing shortage in the Netherlands. The government aims to build one million new homes, an effort requiring around €400 billion in investment.

“This is significantly beyond our capacity alone,” Paul says. “Dutch pension funds have already heavily invested in the market. To meet the target, new capital must come from foreign investors, including pension funds in Canada, Germany, and Switzerland.”

The Dutch housing market has attracted foreign investors due to its transparency and maturity. Public-private partnerships are common, and institutional investors play a crucial role. However, competition from other European markets facing similar shortages presents a challenge in securing foreign capital.

European problem

“Our tight housing market is a European phenomenon and we are competing with European markets with cities like London, Berlin and Madrid,” Paul points out. “If these markets have beter investment conditions than we have, then the capital is more likely to move there.”

Housing minister Mona Keijzer has committed to reducing bureaucratic hurdles and planning requirements to speed up construction. She has also allocated €2.5 billion to infrastructure improvements, flood risk management, and expanding electricity grid capacity.

In addition, the transfer tax on residential property sales, currently 10.4%, will be reduced to 8% in 2026 to encourage investment.

“We call for a stable, stimulating long-term investment strategy and a competitive tax regime,” Paul says. “We must have the equal conditions for all investors, domestic and foreign. We need capital, and international players must feel welcome. The government must enhance the investment climate to make this possible.”

In total 82,000 homes were added to the Dutch housing stock last year, including new build, repurposing old buildings and subdividing existing units, according to new Dutch housing ministry figures.

The total is below the government target of 100,000 new homes a year and the dip is likely to continue in 2025, housing minister Mona Keijzer said. However, from 2026, when government measures begin to take effect, production will grow and from 2027, the target will be met, the minister said.

According to housing ministry statistics, plans for 1,021,000 new homes have now been drawn up.

Slashing red tape

“The measures we are now implementing will bear fruit in a couple of years,” the minister said. “But every step forward is an advance. Our main focus is to remove obstacles to new construction projections, such as local authority red tape, and make better use of existing buildings.”

In December the minister hosted a housing summit with developers, investors, construction firms, local and regional governments, and housing corporations who all signed an agreement aimed at speeding up the development of new homes.

Developers’ organisation Neprom was among the signatories of the deal. “The time for sitting back and waiting for problems to resolve themselves is over,” said Neprom chairman Ronald Huikeshoven. “We have all made difficult decisions to meet each other halfway and look at how things can be done.”

Affordable housing pledge

The signatories to the deal have committed to ensuring that two-thirds of all new developments at the regional level will be “affordable,” and that, in time, 30% of the new properties will be social housing, with rent caps and income requirements for tenants.

This marks a shift from the previous government’s emphasis on ensuring affordable housing in every project. The government has also pledged additional funding to cover the immediate costs of expanding the social housing supply, provided that local councils contribute 50% of the funding. This may well prove a stumbling block, given central government is planning to cut local authority funding.

At the same time, minister Keijzer acknowledged that uncertainties remain around infrastructure issues that need to be addressed, including electricity grid congestion, nitrogen emissions, green spaces in and around cities, and flood risks. She has set aside €2.5 billion to help ease these problems.

Standardisation and less red tape

The signatories have also agreed to standardise rules and regulations, meaning that local councils can no longer impose their own rules on top of those set by the national government. The government itself will no longer introduce regulations that go beyond those agreed at the EU level – a decision which led the minister to earlier tear up the requirement that all new property includes bat and bird boxes.

However, developers are still concerned about the challenges of delivering enough affordable housing and say the financial coverage remains uncertain. “We hope that the agreements made… will provide enough leverage for our members to invest in housing construction in a way that makes economic sense,” Huikeshoven, who also chairs developer AM, said.

Holland Metropole members had earlier expressed concerns about the investment climate and the challenge they face to attract capital to invest in affordable housing.