AMVEST HOUSEVIEW

Residential (investment) market

Market rent increases and annual rent indexation in the mid-rental sector linked to CPI

• High population growth and an insufficient number of new homes are expected to further increase the housing shortage in the coming years.

• Construction costs have risen substantially, and contractors continued to benefit from high demand, with order books covering an average of 14.4 months as of November 2025. Consequently, price increases are expected to persist for the time being. As a result, contractors will continue to benefit from an advantage in tender processes.

• A shortage of personnel is one of the main production constraints, with approximately 40% of construction companies reporting staff shortages (EIB, 2025). In addition, grid congestion, the restrictive limit on nitrogen emissions and an accumulation of requirements are causing construction delays.

• While the national housing policy implemented by VRO (STOER, Wet versterking regie volkshuisvesting, etc.) and the efforts to stimulate construction are positive developments, these measures have not yet led to a substantial increase in housing supply.

• In 2025, the cabinet was dissolved for the second time. As a result, the parliamentary elections on 29 October 2025 brought uncertainty. A minority cabinet will be formed at the start of 2026.

• Thousands of rental homes have been divested due to, among other things, the Affordable Rent Act and significantly reduced appeal of private property rentals due to the tax treatment in Box 3. This trend will continue unabated in the next few years. As a result, the rental stock is declining sharply, putting upward pressure on the market rents in the unregulated sector.

• There is a growing trend of municipalities shifting to the national mid-rental sector cap (€1,185 in 2025 and €1,228 in 2026). As the municipal caps are often lower than the Affordable Rent Act, this shift strengthens the business case for the mid-rental sector. However, a municipal ban on liberalisation and disposing of homes after continuous years of tenancy remains in force for 15 to 20 years.

• Contract indexation for the regulated mid-rental sector under the Affordable Rent Act is based on the Consumer Price Index instead of the Collective Labour Agreement +1%. This is due to most mid-rental contracts being set at the maximum rent permitted under the WWS system. However, the impact on capital growth is limited since valuations are primarily driven by the disposition scenario (and therefore the vacant value growth).

• The price increase of owner-occupied homes appears to be levelling off. However, according to the leading financial institutions, it will remain relatively high in 2026 and 2027, as high home equity and inheritances provide significant capital for households and drive up prices.

• Decreasing interest rates in 2024 and 2025 have contributed to strong investor appetite among Dutch institutions (including ABP, Rabobank, SPW and NLV) for (new) rental housing. A total of €18 billion is available to invest, of which €12 billion is categorised as impact investing, primarily targeting affordable housing.

• Currently, foreign investors appear to have limited interest in Dutch rental properties. This is primarily due to the prevailing investment climate, characterised by changing regulations, fiscal rules and high transfer tax in 2024 and 2025.

• As of 1 January 2026, transfer tax on residential properties decreased from 10.4% in 2025 to 8.0%.

• Brussels may agree to guaranteed loans for housing corporations acquiring mid-market rentals. This would enable housing corporations to bid more competitively (due to a lower return requirement and cheaper capital), leading to increased competition for dominant mid-market rental properties.

Monetary and macroeconomics

Risk-free returns remain stable while initial yields decline

• After several rate cuts in 2024 and 2025, the European Central Bank (ECB) is not expected to lower the deposit rate substantially further, with one or two additional cuts expected at the most in the current cycle.

• Interest rates on Dutch government bonds are expected to remain fairly stable in the coming years at around the 2025 level of 3.0% (10-year).

• Geopolitical tensions such as the conflict in Ukraine, developments in the Middle East and shifting United States trade policies under President Trump are creating economic uncertainty.

• Inflation will decrease further in the Netherlands, which will reduce wage growth in the coming years.

• Modest economic growth is expected, while unemployment remains low, signaling resilience in the labour market. However, defence spending rising to 5% of GDP could have a negative effect on the macroeconomy in the long term.

• Initial yields for residential real estate compressed significantly in 2025, declining by 10 to 20 basis points depending on region, age and location.

• Yields are expected to remain stable in the coming years, partly due to the forecasted stable interest rate environment.