The Dutch residential market

Improved lending conditions and high demand boosted owner-occupied housing prices

• After a relatively short period of decline in 2022 and 2023, housing prices growth is accelerating again. In November 2024, the annual housing price growth was no less than 11.9% (CBS, 2025).

• Factors such as increased lending capacity, lower mortgage interest rates and significant income increases are contributing to the rise in housing prices.

• Moreover, the demand for housing is high, and new developments are lagging. The mismatch between demand and supply will only become more uneven in the years to come.

• The forecasts of the large banks in the Netherlands for the next two years are also relatively positive. On average, the banks expect housing prices to increase by 6.8% in 2025 and 3.8% in 2026 (ABN AMRO, ING, Rabobank and DNB, 2024).

Figure 9: Price development owner-occupied houses

Source: CBS, 2025

Permit numbers are picking up, but new construction remains insufficient

• Due to the improved housing market conditions, permit numbers increased again in 2024. Until October 2024 about 53,000 were issued, compared to 55,000 for the whole of 2023 (CBS, 2024). The number of permits are likely to reach 64,000 in 2024.

• However, labour shortages, rising construction costs and new national legislation continue to impact the financial feasibility of new area developments.

• Since permits for new developments decreased sharply in 2023, the completion of new residential homes is expected to be around 60,000 per annum in the next two years (Capital Value, 2024), which is substantially lower than the last five to seven years.

Figure 10: Annual completion and permits

Source: CBS, 2024, Capital Value, 2024 

Investment volume increased by more than 50%

• Investment activity has picked up, as the price decline of rental homes seems to have bottomed out, and the residential market is attractively priced.

• In 2024, investment volume reached €6.6 billion, which is an increase of more than 50% compared to 2023 (Capital Value, 2025). The low investment volume in 2023 was a result of rising interest rates and surging residential prices in preceding years.

• Private investors, who often purchase assets with a strategy to sell individual units upon turnover, contribute to a lot of the activity in existing properties. Attractive vacant value ratios, combined with the impact of the Affordable Rent Act and higher transfer taxes, have increased the disposition activities of many private investors.

• Appetite for residential investments seems to have increased, and the expected decline in transfer tax from 10.4% to 8.0% will further boost investment activity from 2026 onwards.

Prices have bottomed out and gross initial yields compressed in 2024

• Prices of residential investments bottomed out in the second half of 2023. Additionally, during 2024, gross initial yield levels for prime new construction showed signs of compression in all regions (Capital Value, 2025).

• Prime yield levels in the G5 (Amsterdam, Rotterdam, The Hague, Utrecht and Eindhoven) have compressed by approximately 40 bps in 2024, reaching 3.75% in Q4. In the other regions, the decrease was 20 to 25 bps.

• The expected higher investment activity and assuming a further decline of the risk-free rate (the Dutch 10-year government bond rate) in 2025 will put additional downward pressure on yield levels and boost capital growth of rental homes.

Figure 11: Prime gross initial yield levels residential investments per region

Source: Capital Value, 2025 

The Affordable Rent Act is in effect

• The Affordable Rent Act took effect on 1 July 2024, which means that a part of the liberalised rental sector is now regulated in the mid-rental sector. The points system (WWS) is now used to determine whether a house falls into the social sector, mid-rental sector or free market sector.

• Rental units with a score between 144 points (€879.66) and 186 points (€1,157.95) belong to the mid-rental sector (2024 prices). Rent levels are capped to the maximum reasonable rent, and the rent levels per WWS points are indexed by inflation annually. The points system itself is updated and modernised as well. Amongst other adjustments, more points are given to sustainable homes and less to unsustainable homes. Additionally, the presence of private outdoor space has a positive impact on the number of WWS points.

• In addition to this act, a new regulation is being developed that will require all new developments to have at least a 2/3^rd of affordable (social and mid-priced) and a maximum of 1/3^rd of free market (33%, both rent and purchase) housing.

Contract indexation is capped

• Annual contract indexation is regulated as well. For social housing, the indexation of rental contracts is linked to wage growth until 2025. In 2024, this resulted in a maximum indexation of 5.8%. For 2025, the indexation of social rent is also 5.8%.

• For the mid-rental sector, contract indexation is linked to wage growth plus 1.0%-point. For 2025, this means that rents may be increased by a maximum of 7.7% (wage growth was 6.7%).

• For the free rental sector, the maximum contractual indexation is linked to inflation or wage growth plus 1.0%-point, whichever is lowest. In 2024, this resulted in a maximum indexation of 5.5% (4.5% inflation). For 2025, contract indexation is a maximum of 4.1%.