Average rental prices rise in large cities in the Netherlands due to scarce rental offering

Major concerns about social impact of intentions Dutch government 

Pararius Quarterly Rental Report Q1 2023

In the Netherlands’ five largest cities, the average price per square metre of rental housing in the unregulated sector increased in the first quarter of 2023 compared to the year before, housing platform Pararius reports. The same happened in nearly 75 percent of large and medium-sized cities. In Amsterdam, The Hague and Rotterdam, the price per square metre increased by more than 4 percent. There is growing concern among Dutch real estate experts about the cabinet's plans for the rental market as their effects are already visible. Tenants are responding en masse to vacant rental properties while the overall Dutch rental supply is declining.

In the five largest cities in the Netherlands - Amsterdam, The Hague, Eindhoven, Rotterdam and Utrecht - the average rental price of unregulated sector homes rose. The Hague took the crown in terms of percentage increase; the price of rental homes in The Hague rose by 6.4 percent in the first quarter of 2023 compared to the same quarter last year. For the first time, the price per square metre in The Hague exceeded €18: new tenants paid €18.19 per square metre per month.

Prices also rose in the Dutch capital of Amsterdam. New tenants paid 5.8 percent more for a property in the unregulated sector, for a total of €25.68 per square metre per month. In Rotterdam, where unregulated sector rental properties became 4.8 percent more expensive compared to a year before, new tenants paid €17.91 per square metre per month. In Eindhoven, the price per square metre rose to €17.28 per square metre per month, 2.3 percent more than a year ago.

In percentage terms, the city of Utrecht saw prices increase by 1.4 percent compared to a year before. A rented house in the unregulated sector cost €19.83 per square metre per month.

According to Jasper de Groot, CEO of Pararius, this rise in the price per square metre in large cities in the Netherlands in the first quarter of 2023 is in line with expectations, given the cabinet’s current plans for the rental market. De Groot: "Hugo de Jonge, Minister of Housing and Spatial Planning, aims to regulate the Dutch mid-rental market. Houses awarded less than 187 points according to the housing rating system will receive a fixed rent." As a result of these measures, 327,500 unregulated sector rental properties will revert to the social rental segment¹, according to CBRE's calculations. This comprises half of the total number of unregulated sector homes.²

These plans are causing more and more landlords in big cities to let go of their properties. The Netherlands’ Cadastre, Land Registry and Mapping Agency, commissioned by the Volkskrant (Dutch newspaper), conducted research into the proportion of sold homes in Dutch cities that came from the unregulated rental market. In Amsterdam, over 9 percent of homes sold came from the unregulated rental market, with The Hague following with 7.3 percent.³ These homes end up in the higher-income market, leaving middle-income earners high and dry once again, de Groot said.

De Groot: "Private investors are selling vacant rental properties as a precautionary measure, which actually causes the number of available unregulated sector rental homes to drop drastically. The demand for rental properties remains as high as ever in the Netherlands. This leads to estate agents being inundated with requests from tenants and the Dutch housing market becoming more and more unbalanced. There will always be people who cannot or do not want to buy, but also do not qualify for social housing. These home seekers are allocated to the very cramped unregulated sector supply."

Pararius is seeing a sharp increase in the number of contact or viewing requests submitted to estate agents, especially in the large Dutch cities. De Groot: There are properties in Amsterdam - but also in Rotterdam and Utrecht - that receive more than 500 responses in a short period of time. 

Broker Harold de Haas of Inxxx Rentals in Amsterdam is bearing witness to this. "For a rental property priced at just under €1,500 per month, we recently received 134 applications in just a few hours. 90 percent of these applicants do not qualify for an initial viewing, which doesn't really matter as only one tenant is needed. There is far more demand than supply, and supply is only getting tighter. The Dutch rental market is spread extremely thin."  

According to De Groot, a vast price gap between a social rental home and a rental home in the unregulated sector in the Netherlands is inevitable if the Affordable Rent Act⁴ is passed.

Medium sized cities

As well as the macro figures, Pararius reports at the local level on rental price developments in Dutch localities where more than 30 unregulated sector rental properties have become available in one quarter. In almost 75 percent of more than 70 places, unregulated sector rental prices increased in the first quarter of 2023. In some Dutch cities, including Almelo (+15 percent), Amersfoort (+11.1 percent), Diemen (+19.5 percent) and Gouda (+17.4 percent), the price per square metre rose by more than ten percent.  

Rental prices dropped in Delft (-3%), Groningen (-0.8%), Hilversum (-2.1%), Lelystad (-1.9%), Nijmegen (-1.2%), Zaandam (-3.6%) and Zwolle (-2%), among others.

Delivery forms in the Netherlands

Pararius distinguishes three delivery forms: shell⁵, upholstered⁶ and furnished⁷. The rental price of shell homes in the unregulated sector rose by 2.5 percent in the first quarter of 2023. New tenants paid an average of €14.66 per square metre per month. The price per square metre of furnished homes also rose; new tenants paid 1.3 percent more than a year earlier (€20.07). Upholstered homes fell in price, which for new tenants meant that they paid 4.2 percent less per square metre than a year ago (€15.98).

On the national level, the average price per square metre of rental properties in the unregulated sector in the Netherlands decreased by 1.9 percent compared to last year. New tenants paid an average of €16.85 per square metre per month. Compared to a year earlier, the number of available unregulated sector rental properties in the Netherlands for new tenants fell by 19.6 percent.

Relatively few unfurnished properties are available in the five largest Dutch cities than in the rest of the country. This partly explains why prices rose in the five largest cities, but fell nationwide. In addition, the share of unregulated sector rental properties offered in the five largest cities compared to the rest of the Netherlands decreased compared to the first quarter of last year. Last year, the five largest cities accounted for 51 percent of all rental properties offered in the Netherlands. However, that share dropped to 38 percent in the first quarter of this year. This means that the impact of the five largest cities on the Dutch national average has decreased.

Provinces

In two of the Netherlands' twelve provinces, percentage price decreases were measured in the first quarter of 2023, namely in North Holland (-1.6%) and Utrecht (-1.5%). In the other 10 provinces, the price per square metre increased compared to the year before. 

In the northern provinces of Drenthe (+18.1%), Friesland (+7.9%) and Overijssel (+4.8%), the average price per square metre is well below the national average of €16.85. In Drenthe, new tenants paid an average of €12.86 per square metre per month. In Friesland it was €12.05 and in Overijssel €13.24.  

In Flevoland (+1.5%) and Groningen (+1.5%), the price per square metre is slightly higher: new tenants paid € 15.84 and € 15.54 per square metre per month respectively for a vacant rental property in the unregulated sector.

In the southern provinces of Gelderland (€13.77), North Brabant (€15.47) and Limburg (€13.22), the price per square metre of properties in the unregulated rental sector rose by 3.1, 3.3 and 4.2 percent respectively. The percentage price increase in Zeeland (€13.55) is higher: new tenants in this province paid 6.3 percent more than a year earlier.

In South Holland (€17.38), where the price per square metre lies above the national average, rents rose by 3.9 percent. In Utrecht (€17.51) and North Holland (€21.40), rental prices decreased compared to last year, despite price increases measured in major cities in these provinces. In Q1 2023, Amsterdam's share of properties had a smaller impact on the provincial average due to the significant decrease in the number of available homes in Amsterdam. As a result, rents may rise in Amsterdam while a decrease is observed at the provincial level. The same is the case in the province of Utrecht.

Types of housing in the Netherlands

Compared to a year earlier, new tenants paid 0.2 percent more for an apartment (€18.09). A single-family house (€13.32) cost 0.3 percent more in the first quarter of 2023 than in the previous year.

Area segments in the Netherlands

In terms of area segments alone, there have been minimal developments in the Dutch unregulated rental sector compared to a year before. The vast majority of unregulated sector rental properties offered on Pararius (68%) are smaller than 100 square metres. New tenants paid an average of €20.81 per square metre per month (+0.4%) for a property smaller than 75 square metres, and €16.41 (+1.2%) for a property of 75-100 square metres. The price of rental homes of 100-125 square metres rose by 0.3 percent (€14.23).

The Dutch rental sector has recently faced a swathe of measures, including a restriction on rent increases⁸, tax reform⁹ and buyout protection. Meanwhile, while rents are rising in much of the Netherlands and the supply of unregulated sector rental housing is swiftly diminishing, the Dutch housing market is about to confront another set of drastic measures: ones that are of great concern to many experts.  

On 27 February 2023, Minister De Jonge published the Affordable Rent Bill¹⁰, which aims to bring much of the Dutch unregulated rental sector under regulation. The cabinet intends to regulate the mid-rental segment and bring it under the housing valuation system (WWS), lowering the rents for these properties. The housing valuation system currently applies to homes of up to 149 points. With this extension of the point system, homes of up to 186 points, which currently corresponds to a rent of €1,021.02, will have protected rent.

Jasper de Groot: "In this way, social rental properties are artificially added to the housing stock, entirely at the expense of properties in the unregulated sector. The minister seems to be of the opinion that rents in the free sector are so high because private investors are abusing the situation. However, he refuses to consider the basic economic principle that simply dictates that prices rise when demand is high and supply is very low. It is the market that determines the rent, not the landlord."  

De Groot: "As much as 32 percent of the Dutch housing stock is social housing. Although the unregulated sector rental market has grown from a 4 percent market share to 8 percent since 2012, this is still far too little to meet the colossal demand."

An increasing portion of the Netherlands' population seems to be relying on the unregulated rental sector's small market share. Middle-income earners, such as start-up entrepreneurs, expats, students and single parents, often do not qualify for either owner-occupied or social housing because of their income. De Groot: "Renting in the unregulated sector in the Netherlands also offers flexibility and can be arranged quickly, without a waiting list of multiple years. Then, when they feel ready, people can move on to owner-occupied homes." 

Over 1.2 million households might fall between the cracks and would benefit from a substantial increase in the supply of rental housing. De Groot: "They all exert pressure on the demand for rental housing in the unregulated sector, which has caused prices to rise. But the increase in prices has not been so extreme: the average price of an owner-occupied home has risen more than 2.5 times as fast as the rental price of a free-sector home in eight years."

De Groot finds it incomprehensible that the bill focuses on the smallest segment (rents higher than €1,000 per month), which accounts for only 3% of the total housing stock. "The remedy is worse than the disease, especially since the purpose of the bill is counterproductive, considering the dwindling rental housing. Since 2014, there has been a 37% rise in rents, of which 19% is accounted for by inflation. How, then, does the government view the homeowner who sells his property for almost double the 2014 price?" 

One of the Act's aims is to create more affordable rental housing while maintaining the willingness to invest in new construction. However, that willingness to invest in new construction is anything but guaranteed with the cabinet's current plans, says De Groot. "Pararius has heard the news from estate agents all over the country, but especially in the Randstad. In large cities, more and more investors are relinquishing their properties." Figures from the Netherlands’ Cadastre, Land Registry and Mapping Agency, collected at the request of the Volkskrant, show that a growing proportion of homes sold in big cities comes from the private rental market. The properties are being taken out of rent and sold to people who will live there themselves. The homes now being sold in big cities are erroneously thought to be purchasable by middle-income earners. De Groot: "These properties are simply too expensive for that."

De Groot: "The Dutch government seems to have a completely distorted view of private investors. Where the government should be connecting, it instead polarises, systematically profiling this group as buccaneering slumlords. Private investors make a very large social contribution in terms of housing for middle-income earners in the Netherlands. They let about 75 percent of the unregulated sector rental housing in the Netherlands. Of these private investors, 80 percent let only one home as a retirement investment. Of all homes in the Netherlands, both owner-occupied and rental, only 3 percent are rented out for prices higher than €1,000 per month. The vast majority of Dutch landlords act in good faith and have their tenants' best interests at heart. Indeed, tenants and landlords have many shared interests."

According to De Groot, the minister is ignoring completely the many negative findings of independent experts such as DNB¹¹, OESO¹² and the IMF. The negative findings of the crash tests commissioned by De Jonge himself and carried out by Stec Groep16 are also being ignored. De Groot: "In other countries, there are plenty of examples of the negative effects of far-reaching regulation of the rental market from which we can learn." De Groot is referring to examples in England¹³, Berlin¹⁴ and Sweden¹⁵, among others. 

In the run-up to the bill, its adverse effects are already becoming visible. In large cities, Pararius is noticing a declining trend in the number of newly available rental properties in the unregulated sector. This causes the rents in these cities to rise, as supply and demand grow even further out of balance. New construction is stalling too.

De Groot believes that the growth of the housing supply in the unregulated sector that has already been achieved should be stimulated precisely by avoiding any large-scale changes. "Only positive incentives for investors will contribute to more unregulated sector rental housing. Only then will tenants have more choice and will the situation in the housing market as a whole become much healthier. What happened in the unregulated housing sector during the COVID-19 crisis, where rental supply increased and prices fell as a result, is a clear example of this." 

All in all, we have to consider a much more balanced approach with emphasis on the symbiosis between tenant and landlord. They share many common interests, and only highlighting one side of those interests will lead to undesirable social consequences. De Groot: "As the Affordable Rent Bill currently stands, the shortage of affordable rental housing will remain and a great injustice will be done to investors, leading to a high risk of litigation for the government."

Explanation calculations

The figures in this rental report are based on 23.880 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 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.