Market developments

Dutch economy continues growth

In 2017, the Dutch economy recorded growth of 3.2%[1], the highest level of growth for the past 10 years. Unemployment continued to fall last year, dipping to 4.9% at year-end 2017. This in turn led to a sharp drop in the number of job seekers to 397,000. This was the first time since 2009 that the number of unemployed had fallen below the 400,000 mark. One of the main drivers of this drop in unemployment was the growth in the number of jobs in the Netherlands, which increased by more than 2% in 2017. Hand in hand with last year’s economic growth, consumer confidence increased again in 2017. Purchasing power and consumer spending were both higher than in the previous year.[2]

Increase in number of one and two-person households to 2030

In 2017, the Netherlands added around 100,000 households to arrive at a total population of 17.2 million, the same rise as the previous year. The number of households increased to around 7.8 million (+1%). This figure is expected to grow by more than 600,000 households in the period to 2030, almost entirely due to the ever-growing group of one-person and two-person households (mainly in the 65+ age group). The number of families will see modest growth in the period to 2030, while the number of households in the under-30 age group is actually set to decline in that period. This trend will be subject to distinct regional differences.

While the impact of the ageing population is relatively lower in Vesteda’s core regions, the increase of smaller households is still a factor in these regions. The table below shows the forecasts for household growth. In the core regions, the total number of households (all compositions, with the exception of under-30 couples) is expected to rise in absolute terms. Due to the continuing migration of young people to the larger cities, the growth in the number of one and two-person households will be largely confined to urban areas, including the G4 (Amsterdam, Rotterdam, The Hague and Utrecht). This combined with the pressure on the urban residential market will generate increasing demand for small apartments in most urban areas.

Forecast household growth according to composition and age for the 3 regions and the G4 (Amsterdam, Rotterdam, The Hague and Utrecht) as a whole
 

All households

Families

Singles <30

Couples <30

Singles 65+

Couples 65+

Singles & Couples 30-64

2017

7,811,000

2,578,000

630,000

233,000

976,000

1,015,000

2,379,000

Δ 2017-2030

614,000

18,000

(15,000)

(46,000)

439,000

262,000

(43,000)

Δ Primary

325,000

15,000

15,000

(28,000)

172,000

114,000

37,000

Δ Secondary

168,000

27,000

(14,000)

(11,000)

118,000

68,000

(19,000)

Δ Other

120,000

(24,000)

(16,000)

(7,000)

149,000

79,000

(61,000)

Δ G4

141,000

(6,000)

23,000

(11,000)

60,000

37,000

36,000

  • * Source: Socrates 2016

Increase in regional home sales, decline in large cities

The Dutch residential market is remarkably dynamic at the moment, mainly driven by low interest rates. The full-year 2017 saw the sale of more than 234,000 existing owner-occupier homes. The fourth quarter did see a dip in the number of homes sold, as home sales declined by some 6% compared with the fourth quarter of 2016. This was almost entirely due to overheating at a local level, which led to a sharp drop in the number of homes available.

On average, buyers had a choice of around four homes in 2017, compared with a choice of 10 homes in 2015. In cities like Utrecht, Amsterdam and Almere, the choice for buyers was even more limited, at just two homes.[3]  This obviously also led to a drop in the number of transactions in these cities. In relative terms, the biggest increase in the number of transactions was seen in regions such as Flevoland and Drenthe.[4]

The number of completed new build homes has been increasing steadily every year since 2014. In 2017, we saw the completion of more than 55,000 new build homes, compared with 45,000 in 2014. However, total new build production is still lagging way behind the current demand for homes. This combined with developments on the market for existing buildings resulted in an average increase in home prices of 9% in 2017 compared with the previous year.[5]  However, there are marked regional differences. Urban regions are still accounting for the strongest rises in home prices. Peripheral regions, such as Friesland, Groningen, Drenthe, Overijssel and Zeeland, have actually seen a dip in home prices at a local level.

Price development (y-o-y) in owner-occupier home sales on the basis of NVM regional division
  • * Source: NVM 2018, edited by Stec 2018

Rental homes still very popular, scarcity impedes tenants flows

The developments on the owner-occupier market, combined with the withdrawal of housing corporations from the higher-end rental segment, are driving demand in the residential rental sector. Over the past few years, mortgage requirements have become a lot stricter. First-time buyers have suffered the most from these measures, as they tend to have very little of their own capital to invest, so they have quickly turned to other alternatives, such as the liberalised rental sector.[6]  As on the owner-occupier market, demand is way outstripping supply, which has created a major shortage of rental homes. As in previous years, this shortage once again led to an increase in rental prices per square metre in 2017.

We are also noticing major regional differences in the market for rental homes. The next graph shows that prices per m² in Amsterdam are on average higher than prices in the other G4 cities. Outside the G4 cities, the average price per m² is even lower. Rising rental prices together with ongoing urbanisation and an increase in the number of one-person households is adding pressure on the market for small homes.

Local governments are therefore increasingly focused on the construction of the social and mid-segment rental homes. Some local authorities – such as Utrecht and Amsterdam – are introducing quotas for the number of homes built that must be affordable for lower and middle-income households. They are also drawing up rules for maximum rent increases, all in an effort to make sure homes remain affordable.[7]

Six-monthly measurement of rent levels per m², broken down into Amsterdam, other G4 cities (Utrecht, The Hague, Rotterdam) and outside the G4
  • * Source: MSCI 2018

Competition driving up prices, depressing initial yields

In 2017, investments in the Dutch residential rental market passed the €5 billion mark, compared with €4 billion in 2016). This is a quadrupling of investments compared with five years ago. Never before has so much money been invested in Dutch rental properties. These investments cover both existing homes and new build rental properties in the mid-rental segment. Rental properties continue to be a popular investment product thanks to the low risk profile and stable returns. This is attracting a growing number of investors, both from the Netherlands and abroad.

In 2017, investors acquired 35% more new build properties than in 2016, taking the total last year to 17,000 new build homes.[8] And yet demand is still outstripping supply and the market offers too few investment opportunities for the available capital. This led to another hike in prices in 2017 and further compression of initial yields, mostly in popular cities and regions. This trend is also expected to continue in 2018.[9]

  • 1 CPB - December estimate 2017
  • 2 DNB - Economic Developments and Outlook
  • 3 NVM - Residential market figures 2017 - Q4
  • 4 DNB - Economic Developments and Forecast
  • 5 NVM - Residential market figures 2017 - Q4
  • 6 Rabobank - Quarterly report Residential market
  • 7 Colliers - Sector report Residential market
  • 8 Capital Value - Record investments in Dutch rental homes
  • 9 Colliers - Sector report Residential market