Prices increase slightly in the Dutch unregulated rental sector

Small investor completely paralyzed

Pararius quarterly rental report Q3 2022

The average rent of a rental property in the unregulated housing sector in the Netherlands rose by 0.6 percent in the third quarter of 2022 compared with a year ago. This is reported by property portal Pararius. Shell and furnished rental homes rose in price, the price of upholstered homes remained the same. A rental home would be online for an average of 34 days, 8 days less than a year ago.

Delivery forms in the Netherlands

The condition in which a property is rented out always influences the rent. Pararius distinguishes three delivery forms: shell¹, upholstered² and furnished³. Unregulated sector rental properties that are rented out furnished in the Netherlands are the most expensive; new tenants paid an average of 4.1 percent more in the third quarter of 2022 than last year: €20.04 per square metre per month. Upholstered homes remained the same in price in the past quarter, which means that new tenants - just like a year ago - paid an average of €15.98 per square metre per month. New tenants paid 2.8 percent more than a year ago for a shell rental in the unregulated sector; €14.77 per square metre per month.

National developments

In the third quarter of 2022, new tenants in the unregulated sector in the Netherlands paid an average of €16.90 per square metre per month. In the first two quarters of this year, the square metre price exceeded 17 euros, so currently the price is slightly below that. Compared with the same quarter in 2021, the national square metre price has increased by 0.6 percent.

The national square metre price has fluctuated between 16 and 17 euros since the first quarter of 2019. Jasper de Groot, CEO of Pararius: “The average square metre price is still rising, but a lot less rapidly than in the years before 2019. In the third quarter of 2019, the square metre price was €16.62, two and a half euros more than three years earlier (Q3 2016, €14.11). In the third quarter of 2022, the square metre price is “only” €0.28 higher than three years before.”

Provinces

In all the most northern Dutch provinces, percentage price increases were measured. In Groningen (€15.44), new tenants paid 1.7 percent more than last year, in Friesland (€11.11) 1.3 percent and in Drenthe (€11.01) 3 percent. Rents for new tenants rose the fastest in Flevoland, where new tenants paid 7.6 percent more than a year ago. This province is also the most expensive in the north: an unregulated sector rental home cost an average of € 15.85 per square metre per month for new tenants in the third quarter of 2022.

In Overijssel (€12.84) and Gelderland (€13.29), rents for unregulated sector homes rose by 7.7 and 3.4 percent respectively.

The provinces south of the Randstad⁴ show different developments. In Zeeland, where new tenants paid an average of €12.45 per square metre per month in the third quarter of 2022, prices rose by 0.8 percent. In North Brabant (€14.87), rents for unregulated sector homes also rose by 2.5 percent. Only in Limburg new tenants paid 2.4 percent less than a year ago: €12.95 per square metre per month.

The three Randstad provinces – Noord Holland, Zuid Holland and Utrecht - are well above the other provinces in terms of square metre price. The average square metre price of rental homes in these provinces is also above the national average. In Zuid Holland (€17.10), the square metre price increased by 3.9 percent, in Utrecht (€17.79) by 4 percent. Noord Holland remains the most expensive Dutch province to rent a home. New tenants paid an average of €21.93 per square metre per month in the third quarter of 2022, which is 5.7 percent more than a year ago.

Five largest cities

The rents of unregulated sector rental homes in all five largest cities have increased in percentage terms. In the capital Amsterdam (€25.24), new tenants paid 10.3 percent more for a rental home than in the same quarter last year. In Utrecht (€20.23), where the square metre price also exceeds twenty euros, new tenants paid 6.5 percent more. In The Hague (€17.87), Eindhoven (€17.42) and Rotterdam (€17.51), square metre prices are slightly above the national average. In these three cities, unregulated sector rental housing cost 6.7, 9.1 and 4 percent more respectively in the third quarter of 2022 than a year ago.

Affordable renting in the Dutch unregulated sector? This is possible in Heerlen (€10.30), Almelo (€10.46), Roermond (€10.79), Assen (€11.47) and Venlo (€11.67). As a new tenant, you pay the most per square metre in Amsterdam (€25.24), Amstelveen (21.38), Haarlem (€21.28) and Utrecht (€20.23).

City level

Amsterdam

A price increase was measured in all districts of the Dutch capital Amsterdam in the past quarter. In the centre of the capital, new tenants paid an average of 11.5 percent more for a rental home than a year ago, €28.19 per square metre per month. After the centre, Amsterdam West is the most expensive part of the city to rent a house, rents here rose by 11.2 percent in the third quarter to an average square metre price of €27.60. In Amsterdam South, the price of  sector rental home rose by 13.8 percent, new tenants paid €27.26 per square metre per month. Only in Amsterdam Zuidoost did the square metre price remain below twenty euros in the third quarter of 2022; new tenants paid €19.89 per square metre per month (+12%).

Rotterdam

In all Rotterdam neighbourhoods the rents of homes in the unregulated sector also rose compared with last year. Rents rose the fastest in percentage terms in Feijenoord (€16.39), where new tenants paid 7.4 percent more than in the same quarter last year. In the centre of the port city, new tenants paid 6.6 percent more for an unregulated sector rental home: €19.68 per square metre per month. Rotterdam Centre is therefore also the most expensive neighbourhood in Rotterdam, followed by Kralingen-Crooswijk (€18.45), where rents rose by 3.1 percent. Prins-Alexander (€14.50) is the cheapest neighbourhood to rent a home in the unregulated sector of Rotterdam, new tenants here paid 4.9 percent more than a year earlier.

Utrecht

In many Utrecht neighbourhoods, the square metre price is above twenty euros. This is the case, for example, in the inner city (€21.65), where rents rose by an average of 3.1 percent in the third quarter of 2022. Also in Northwest (€21.11) and Northeast (€20.41), the square metre price of an unregulated sector rental home rose by 2.5 and 6.7 percent respectively. The square metre price in Utrecht Overvecht is around the national average: new tenants paid an average of €16.70 per square metre per month in the third quarter (+5.4%).

Home types in the Netherlands

The apartment type of housing is the most expensive per square metre to rent in the Netherlands. In the third quarter of 2022, the average square metre price amounted to €17.96, an increase of 2.2 percent compared with a year ago. New tenants paid an average of 2.9 percent more for single-family homes: €13.77 per square metre per month.

Area segments in the Netherlands

Smaller rental homes are the most expensive per square metre in the Netherlands. In the third quarter of 2022, new tenants paid €20.52 per square metre per month for a house up to 75 square metres, a price increase of 1.8 percent. For homes between 75 and 100 square metres, new tenants paid 3.8 percent more, €16.40 per square metre per month. The largest percentage price increase was measured for rental properties between 150 and 175 square metres. New tenants paid 8.3 percent more than a year ago (€14.42).

Small investor completely paralyzed

The government has prepared several measures to improve the situation on the Dutch housing market. According to De Groot, these measures are not always favourable for the Dutch unregulated rental market, and certainly not for investors, who are increasingly discouraged from investing in the housing market. De Groot: “The cabinet does not seem to want to understand how important the role of investors is for the housing market.”

Increase in transfer tax
The Dutch government intervenes in the housing market by, among other things, raising the transfer tax. From January 1 2023, the transfer tax will be increased to 10.4 percent. This is stated in the new coalition agreement that was presented during Budget Day in September⁵ and applies to buyers who are not going to occupy the house themselves. First-time buyers under the age of 35 do not pay transfer tax, buyers from the age of 35 who will occupy the home themselves will continue to pay 2 percent transfer tax. In this way, the government wants to improve the position of first-time buyers and movers versus investors in the owner-occupied housing market. “Many investors invest in the housing market in order to build up returns for their retirement. But investing in this way is becoming less attractive by the day, because the cabinet is implementing one measure after another to keep investors away," said De Groot.

And that while, according to De Groot, investors can make a major contribution to increasing the unregulated rental sector in the Netherlands. The number of available rental homes in the unregulated sector has been extremely low for years, certainly in comparison with the owner-occupied market or the social rental housing market. “Only 8 percent of the total Dutch housing stock falls in the unregulated sector, but an increasing part of the Dutch population seems to be dependent on exactly that sector,” says De Groot. Middle incomes, but also the self-employed, expats, single or divorced parents; they are all people who often do not qualify for an owner-occupied home because their income does not allow it, but they also cannot claim social housing because their income is too high. This is the case for almost 1.2 million households who would benefit from a strong growth in the supply of unregulated sector rental housing.

Mid-market segment rents also regulated

Minister for Volkshuisvesting en Ruimtelijke Ordening (Social Housing and Urban/Rural Planning) Hugo de Jonge recently announced that he wants to raise the upper limit of the regulated rental sector to €1,000 in 2024.⁶ The points system that currently applies to the social rental sector may then be expanded to 187 points. It is currently at 146 points and €763. This rule would then apply to new leases and should offer tenants in this market segment protection against price excesses. To ensure that homes with a rent of €1,000 end up with the right people, De Jonge wants to work with a form of allocation.

De Groot predicts that investors will increasingly withdraw from the housing market. “When the measure on regulation of the mid-market segment was announced, it already caused a lot of unrest among developers and investors. Construction projects were postponed and investors withdrew. Just by making the plans known, a lot of commotion was created.”

De Groot continues: “Landlords are encouraged to sell their homes when those become available from tenants. As a result, the rental supply in the unregulated sector is already being reduced and the stock of mid-market rental homes will not be able to increase. Simply because the landlords do not accept this unprofitable scenario, with its artificial shift to the regulated segment.” The construction of new homes is also under threat for several reasons, including rising construction costs as a result of high gas prices and shortages of materials.⁷

Explanation calculations

The figures in this rental raport are based on 25,774 homes that were removed in the second 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.

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). 

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.

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.