RESIDENTIAL

Keypoints

  • Slow start to the investment year
  • Initial yields decline slightly
  • Demand for rental properties increases, tightness continues
  • House prices continue to rise

Slow start to the investment year

The investment volume for Dutch rental properties is expected to be higher in the first quarter of 2025 compared to the same period in 2024. This is evident from preliminary figures from RCA. Currently, the volume is just over €520 million, roughly equal to the same period in 2024, but this is expected to rise further due to late reports. There were particularly many transactions in existing construction. There are still parties active with a sell-off strategy. Activity in the new construction market was limited, despite increased interest from institutional investors.

RESIDENTIAL INVESTMENT VOLUME BY QUARTER (€, BILLIONS)

Source: RCA (2025), edited by Achmea Real Estate

Initial yields decline slightly

The prime initial yields fell slightly in the first quarter by 5 to 10 basis points. There is increased interest in the investment market, but geopolitical developments have led to more economic uncertainty. It is expected that Dutch homes, due to significant scarcity, will be less affected by a trade war. The exact economic impact is still unclear. Since risk-free interest rates have risen faster than the decline in initial yields, the risk premium has decreased slightly. The trade war that began in early 2025 is expected to cause more fluctuations in the risk-free rate.

PRIME YIELDS

Source: MSCI, Oxford Economics, C&W (2025), edited by Achmea Real Estate

High demand for rental properties remains

The vacancy rate of rental properties owned by institutional investors further decreased in the fourth quarter to 1.3 percent, approaching the low point from 2023. The tightness in the rental market remains significant, and new construction projects are often oversubscribed. The market rent growth for rental properties rose to 7.8 percent due to high demand for rental properties. Figures for the first quarter will be available later, but it is expected that the scarcity and strong rent growth will continue (source: MSCI). Recently, the triennial WoON survey was released, which is used as input for local and national housing policy. The main conclusion for the rental market is that the preference for rental apartments among home seekers has increased by about 25 percent compared to the previous survey in 2021. The preference for rental properties has also increased for single-family homes. In total, about half of home seekers now prefer a rental property, with a quarter of those in the private sector. Affordability in the rental market has improved overall, with the net rent-to-income ratio rising from 25.4 percent to 24.7 percent. However, affordability for liberalized rental properties has worsened, with the rent-to-income ratio rising from 40 percent in 2021 to 43 percent now. The strong increase in market rents has been a significant factor in this (source: Rijksoverheid)

Housing market continues to perform well

House prices decreased by 1.8 percent in the first quarter of 2025 compared to the fourth quarter of 2024. Compared to a year earlier, prices increased by 9.7 percent. This is evident from figures from the NVM. One in five sold homes was a former rental property. Since the prices of these homes, typically apartments, are relatively low, this depresses the average price. The number of transactions increased by 13 percent compared to a year earlier. The first quarter of 2025 saw 33,615 sold homes, the highest activity since the first quarter of 2021. Supply increased slightly compared to the fourth quarter of 2024. The tightness indicator rose again: a potential home buyer has an average choice of 2.3 homes, compared to 1.8 last quarter. The NVM figures are based on the average transaction price and provide a rough, but current indication of house price development. The price index for existing owner-occupied homes (PBK) from CBS and Kadaster gives a more accurate but delayed indication. The first quarter figures are not yet known, but based on expectations from Oxford Economics, the PBK is expected to rise by 1.3 percent in the first quarter. Although the growth rate is slowing down, the index is still expected to rise by 10.3 percent on an annual basis. The Eigen Huis market indicator, which reflects consumer confidence in the housing market, further recovered in 2024 and is nearly positive. In December, the indicator stood at 99 points, the highest level since November 2021 (100 is 'neutral' on a scale of 0 to 200).

INDEX OF PURCHASE AND RENTAL PRICES (2015=100)

Source: MSCI, Oxford Economics, Kadaster (2025), edited by Achmea Real Estate

Construction costs continue to rise

Construction costs for new apartments rose further in the first quarter of 2025 by about 1 percent. The annual growth was approximately 4.5 percent. Wages were a significant driver of the increase in construction costs. The number of building permits rose again in the fourth quarter of 2024; figures for the first quarter of 2025 will be available later. The upward trend in the number of building permits continued in the third quarter, but remains well below the high numbers of 2020 and 2021. The order book of contractors stabilized, causing the tender index to rise slightly in the first quarter of 2025 and remain below the construction cost index (source: IGG).

INDEX OF CONSTRUCTION COSTS (2015=100)

Source: IGG (2025), edited by Achmea Real Estate

Outlook

Despite the relatively cautious start, the investment market is expected to perform better in 2025 than in previous years. Due to the announced reduction in transfer tax, it is expected that the volume, particularly in the fourth quarter, will be somewhat lower. Therefore, it is unlikely that the high volumes from 2018-2020 will be reached in 2025. Based on the current situation, initial yields are expected to remain approximately at current levels. However, uncertainty remains regarding the effect of the trade war on risk-free rates. The tightness in the rental market is expected to persist in the coming quarters. Due to the sell-off of rental properties from private investors on one hand and the still low new construction production on the other, the tightness remains significant. As a result, market rent prices are also expected to rise sharply, benefiting particularly unregulated properties. In the home market, house prices will continue to rise due to the tightness in available homes. However, since affordability is at stake, the increase will be somewhat lower than the high level of 2024 but still well above inflation. Finally, it is expected that the increase in construction costs will level off somewhat in 2025. Since the construction cost index is above the tender index, it is expected that contractors' margins will decrease.

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