Market developments

Economy moves full steam ahead

Last year, the Dutch economy continued to firm and we saw upward adjustments of growth forecasts for both the economy and household purchasing power. Economic growth eventually amounted to 2.4%[1], above the average for the past 20 years. At the same time, the predictions for purchasing power in 2016 were adjusted upwards twice[2]and consumer spending increased rapidly, especially in the second half of the year[1]. The main drivers of these positive developments were the 15% drop in unemployment (down by 90,000 to below 500,000)[1] and the rise in consumer confidence, which has risen to a level last seen in 2007[1].

Major regional differences in demographic changes

The number of households in the Netherlands currently stands at more than 7.7 million, with family households accounting for around one third of this figure. The number of households is expected to grow by around 700,000 to 8.4 million in 2030[3]. This growth will be driven almost exclusively by the ageing of the population. The number of 65+ households is set to grow by some 750,000, while the number of family households will see virtually no growth in the same period. The number of <30 households will actually fall, but there will be major regional differences in this trend. The number of <30 households will increase in Vesteda’s primary region, especially in the four largest Dutch cities. Due to the continuing migration to the country’s largest cities, we will see a marked increase in the number of one-person and two-person households in the years ahead.

Prognosis households according to composition and age for the three regions and the G4 (Amsterdam, Rotterdam, The Hague, Utrecht) as a whole

 

All

Family

Singles

Couples

Singles

Couples

Singles &

 

households

 

<30

<30

65+

65+

Couples

       

30-65

2016

7,730,000

2,574,000

619,000

230,000

947,000

993,000

2,367,000

2016-2030

+695,000

+21,000

(3,000)

(44,000)

+468,000

+285,000

(32,000)

Primary

+265,000

+5,000

+30,000

(14,000)

+128,000

+89,000

+27,000

Secondary

+172,000

+4,000

(9,000)

(7,000)

+123,000

+76,000

(15,000)

Other

+257,000

+12,000

(24,000)

(22,000)

+217,000

+119,000

(45,000)

G4

+155,000

+15,000

+31,000

+10,000

+51,000

(20,000)

+68,000

  • *Source: Socrates 2016

Stable growth owner-occupier market; some signs of overheating

It was already clear in 2015 that the owner-occupier market was recovering and was once again showing signs of stable growth. In the course of 2016, this stable growth moved in the direction of overheating of the residential market at a regional level. Last year saw the sale of around 215,000[1] existing houses. The number of houses sold outpaced the number of houses offered to the market. As a result, at year-end 2016 there were 28% fewer houses for sale than at the end of 2015. This means that consumers (house buyers) had an average of six houses to choose from at the end of 2016, compared with a choice of 10 at the end of 2015[4].

The number of new-build houses was also insufficient to meet the burgeoning demand. All these factors led to an annual average rise in house prices of 8.9% for the Netherlands as a whole[5]. The average sales price for houses is currently 20% above prices at the bottom of the market in 2013. But there are major regional differences. In the Amsterdam region, house prices were up by some 22.9% year-on-year, while transaction prices actually fell in the northern-most parts of the Noord-Holland and Overijssel provinces last year[5].

Price developments houses sold last year

Continued demand on rental market

Like the owner-occupier market, the residential rental market also saw a number of positive developments last year, including an increase in the number of tenant movements compared with 2015[6]. The supply of rental houses was once again outstripped by demand. This was due to the fact that last year saw a relatively modest increase in the number of new-build rental houses and the fact that housing corporations now have to allocate houses strictly according to income levels and are steadily withdrawing from the liberalised rental sector. This resulted in a very low vacancy rate of 2.65%[7] in existing stock. The increase in the number of freelancers and the stricter requirements for mortgages are also increasing the pressure on the rental market, and more specifically in the mid-rental segment, which is in turn pushing up rental prices. As it does in the owner-occupier segment, this pressure varies regionally. The graph below clearly shows that in Amsterdam the prices are higher and are rising more quickly than in other parts of the country. The increasing urbanisation and the rise in the number of households with an above-median income will also continue to increase demand in the years ahead.

Rental prices per square metre

Sharp rise of investments in Dutch residential real estate market

In 2016, investments in Dutch residential rental houses totaled over € 4 billion, a rise of 33% compared to the previous year. Dutch institutional investors accounted for the lion’s share of this amount, as they invested more than € 3 billion, a sharp rise on the € 850 million they invested in 2015. Mid-rental segment new-build houses accounted for the bulk of these investments in 2016[8]. As in 2015, the burgeoning demand for residential real estate investments led to a narrowing of gross initial yields in popular regions in 2016. Value growth was also seen in a larger part of the country last year. The main drivers of value growth were the declining supply on the owner-occupier market and the continued demand for real estate investments.

  • 1CBS Statline
  • 2CPB
  • 3Socrates 2016
  • 4NVM press release 4th quarter figures
  • 5NVM
  • 6MSCI Transaction monitor
  • 7MSCI 2016 Q3
  • 8Capital value