The outlook for 2018

Economic growth set to continue

The economic outlook for the Netherlands is positive for 2018. Economic growth is expected to continue and the most recent forecasts are predicting GDP growth of 3.2%.[1] This growth is being driven by the continuing increase in business confidence and investments, household consumption, investments in houses and growing exports. Government spending is set to increase 3.5% this year, largely as a result of investments in education and increased defence spending. Employment is expected to increase by some 2% this year, taking unemployment even lower to around 3.9%, the lowest level in 10 years.[2] Companies are likely to increase wages to retain or recruit staff, which will have a positive impact on both overall wages and household spending power.

That said, although the outlook for the year ahead is positive, the current growth forecast does come with a number of upside and downside risks. On the one hand, if households spend more than expected, economic growth could come in even higher, which could boost household spending even further, business investments could rise even higher than estimated, or wages could increase more than expected. On the other hand, lower wage increases than estimated, the overvaluation of assets as a result of surplus liquidity and low interest rates, plus the impact of Brexit, could have a negative impact on economic growth and lead to a slowdown. On top of this, there is the question of whether the ECB will continue with its current (monetary stimulation) policy, and whether the government’s education and defence spending will in fact boost employment growth, given the current tightness on the labour market.[3]

Pressure on owner-occupier and rental markets due to lagging supply

In 2018, we do not expect to see any alleviation of the pressure on the residential market[4], due to continued economic growth combined with the lagging supply of new build houses. The pressure on the residential market is more likely to increase, especially in the larger Dutch cities. Given the continued lack of supply and steadily increasing demand, average home prices are expected to increase by around 6% nationally in 2018. The residential supply is falling in certain regions and the total number of transactions across the country is expected to dip by 5% compared with 2017.[5]  Interest rates are likely to remain low for the foreseeable future, but rates will eventually start to rise in line with any increases in inflation. A hike in interest rates will make it even more difficult to buy a home, especially for first-time buyers.

Competition in investment market pressuring initial yields

The Dutch residential real estate investment market is expected to remain attractive in 2018. The structural demand for liberalised sector rental homes, combined with the relatively limited supply, will guarantee relatively stable returns for investors. Now that the economy is picking up (and inflation is rising), there is the risk that the ECB will change its monetary policy. The announced scaling back of the ECB’s bond-buying programme and any hikes in interest rates may lead to upward pressure on return requirements.

The lack of investment opportunities will be especially marked in the larger Dutch cities this year. This is likely to make medium-sized cities more and more attractive for residential real estate investors. There is certainly more supply, but investors do also run greater risks by investing in these areas. Many investors are shifting their investment focus from an individual unit sale scenario to the retention and exploitation of existing residential complexes.

Local government authorities are putting a lot more focus on the regulation of the social and mid-rental segment in new build projects in an attempt to keep homes affordable. The stricter rules could hamper the development of suitable locations in land development, which may put a partial brake on the dip in initial yields. It will be some time before we see the full impact of these rules.[6]

The outlook for 2018


Economic growth thanks to low interest rates, increasing investments and consumer spending

Rising wages

Rapid scale-back in ECB’s monetary (stimulation) policy

Rising employment

Higher household spending power

Uncertain international influences, such as impact of Brexit and trade protectionism

Drop in unemployment to lowest level in 10 years


Residential market -

Tight market for owner-occupier homes is driving up demand for rental homes

(Excessive) influence of local authorities on regulation of rental market reduces investment opportunities

Loss of momentum due to limited investment opportunities and lack of locations

Shortage of both mid-segment rental homes in the < €1,000 p.m. price range and the segment above this


Low inflation limits potential for rental increases

Residential market -

Continued high demand for owner-occupier homes

A potential rise in interest rates makes it more difficult for first-time buyers to buy homes

Declining housing supply in popular areas

Low interest rates


Increasing tightness right across the residential market


Mortgage requirements get stricter every year

Investment market

Dutch investment market remains attractive due to low risk profile and stable returns

Less focus on unit sales and more on retention and exploitation of existing residential properties

Steadily shrinking supply for an ever-growing group of investors increases competition and decreases yields

Medium-sized cities more and more interesting for investment assets

Limited supply of development locations or existing real estate

  • 1 CPB - March forecast 2018: economic outlook 2018
  • 2 CPB - December forecast 2017: economic outlook 2018
  • 3 CPB - December forecast 2017: economic outlook 2018
  • 4 ABN Amro - Housing market monitor January 2018
  • 5 ABN Amro - Housing market monitor January 2018
  • 6 Colliers - Sector report Residential market