Outlook for 2025
Market developments
The Dutch residential investment market, which started to recover in 2024, is likely to gain further momentum in 2025. After facing substantial changes in recent years, mainly due to rising interest rates, high inflation and uncertainty about possible government measures, the market seems ready for a rebound. The investment climate in general is expected to improve, driven by the perspective of the reduced transfer tax (to 8% in 2026 from the current 10.4%), ongoing pressure on the housing market and with clarity regarding the introduction of the Affordability legislation most uncertainty on this level was mitigated (source: CBRE, DNB). However, we see that additional local building regulations and requirements for new build product put restraints on feasibility of new developments.
The Dutch economy is projected to experience more robust growth in 2025 compared with 2024. The Dutch Central Bank (DNB) expects the economy to grow at a rate of 1.3% in 2025, up from 0.5% in 2024. The European Commission projects an even higher growth of 1.6% for the Netherlands in 2025. Inflation is expected to stabilise further in 2025, potentially allowing for more accommodative monetary policies. However, the level of inflation is still well above the target of 2%, which makes this monetary easing fairly uncertain. The exact trajectory of interest rates and inflation will depend on broader economic developments and European Central Bank policies.
Despite the expected economic improvement, challenges persist. The housing shortage remains a significant issue, and the transition to sustainable energy continues to be a priority. The impact of government regulations, including the Affordable Rent Act implemented in 2024, will likely continue to influence the residential market in 2025. Furthermore, the macro-economic and political developments make the short-term outlook uncertain. However, while short-term uncertainties may persist, the long-term outlook for Dutch residential investments remains positive. The sector is likely to continue to generate stable returns, particularly as the market adjusts to new regulations and economic conditions stabilise.
Impact on our portfolio
Given the quality of our portfolio, Vesteda is well positioned to respond to these market developments. We expect our operational performance to remain solid, driven by high demand for our homes that are attainable for middle income households. Inflation will have an impact on the cost of housing for our tenants, and also on the operating expenses of the portfolio. The rise of interest rates has an impact on our cost of debt, and this puts pressure on our results.
As a result, we will closely monitor our financial targets, remain committed to our long-term strategy and we will continue to invest in the quality and sustainability of our portfolio. The investments will increase the quality of our assets and result in a future-proof portfolio, which will in turn reduce our overall risk levels. By complying with higher ESG standards and scoring better on affordability and sustainability, we will be able to attract more green and social funding at favourable terms.
Furthermore, we may increase divestment volumes of assets that do not meet (or cannot meet) long term portfolio criteria, and will consider to reduce our target for new inflow to reduce our future financing needs.