The housing market is unaffordable. You hear it everywhere, don't you? What a misery. Homes are unaffordable especially in Amsterdam and Utrecht. Regulate, and that's the end of it. Then you live in the middle of the city for a small amount. Now that would be fantastic. Then you can use the rest of your money to enjoy life. Yes, of course this is exaggerated. There are some really unpleasant and genuinely pressing situations. But a large share of the people living in the Randstad also have a pretty unrealistic wish list and a life of luxury.
Contents
- Arm aber Sexy
- Myths and facts about rents in the Netherlands
- From pride to selling up
- Conclusion: between dreams and reality
From rent experiment to drama. Berlin, the city of contrasts, where cheap housing was once plentiful, has been confronted with a challenging development in its rental market in recent years. Almost four years ago the city government took a drastic decision: rents for homes built up to 2014 were frozen for five years, with the exception of new builds. But this rent regulation experiment ended in drama, with deep roots in the city's past.
Arm aber Sexy
Berlin, once described as ‘arm aber sexy’ (poor but sexy) by the then mayor Klaus Wowereit, was transformed after the Cold War into the cultural centre of Europe. After the fall of the Wall in 1989, people flocked to the west in huge numbers, leaving cheap housing available in abundance. At that time squatting was still easy, and for a short while it was even tolerated. As a result many people lived for free. About 80% of people in Berlin rent their home. In Germany the Wohnkostenquote (the share of income spent on housing) is between 25 and 30% of net income. In the Netherlands it's around 30%. Fairly comparable.
Growing pains and rents
After German reunification Berlin went through a building boom, but the growth also brought challenges for the rental market. Between 2005 and 2022 rents rose considerably, with the average price per square metre almost doubling. Despite attempts to regulate the rise with the Mietspiegel, rents kept rising because of growing demand and weak enforcement.
In February 2020 the city government stepped in with the Mietendeckel, freezing almost all rents within existing tenancy agreements at their July 2019 level. This measure applied to more than 1.5 million homes, but the result was disastrous. The rental market practically ground to a halt. Investors pulled out. This put even more pressure on the rental market. A year later the German constitutional court put an end to the experiment. There were fewer rental homes and demand was even greater. There was even more uncertainty. We're now seeing the same thing happen in the Netherlands. Things are being regulated. A higher transfer tax for investors, a higher tax burden and lower rents. Because of this uncertainty, landlords are selling their apartments. As a result, prices are going through the roof. In 2022 the average rent in Utrecht was €1,400; in 2023 it was already €1,595. Last month's transactions show an average rent in Utrecht of €1,650. So we're seeing rents rise enormously. In 2022, 1,362 rental homes in Utrecht were taken off Funda as let; in 2023 that was only 1,093. A drop of almost 20%.
Myths and facts about rents in the Netherlands
The Dutch love to moan. So we also act as if our houses are ridiculously expensive. It may well feel that way. But our average housing cost ratio of 30% is comparable to the rest of Europe. In the United Kingdom the housing cost ratio is between 30 and 40%. In the Netherlands we complain enormously, but is that really justified?
Statement 1: Homes in the Netherlands are unaffordable
Just ask my family in New Zealand whether our homes are unaffordable. They're jealous of our house prices. It just goes to show that you always have to put things in perspective. Over there the housing cost ratio is around 30% when you take out a mortgage. But the interest rate is only fixed for 2 years. When rates rise, your housing cost ratio suddenly becomes absurd. Prices there have risen so steeply that hardly any first-time buyer can afford a house any more. I speak from experience when I say that the houses are also really basic, and most of them look like a kind of chalet. Your family really belongs to the happy few if you can buy a house. You can see a very clear difference in this within our family.
Fact: the housing cost ratio of tenants fell between 2015 and 2021, from 35.4 to 33.2%. There are no more recent figures, but with rents rising I suspect the housing cost ratio has gone up and will keep going up. For homeowners it fell from 26.2 to 22.4 per cent. Because the Netherlands has a relatively high number of owner-occupied homes, total housing costs in the Netherlands averaged 23.9 per cent of our income. The housing cost ratio of private tenants is the highest. But we forget that a great many people also live very cheaply. So housing in the Netherlands is relatively affordable. The younger generation has, relatively speaking, the highest housing cost ratio. What plays a big part in the high house prices in the Netherlands is that we can borrow so much. So our house prices depend enormously on interest rates and our income.
Statement 2: Investors charge extortionate rents
This isn't true. There are always excesses. But people often forget that these aren't the norm. However, because of rising interest rates and the increased tax burden, investors have no choice but to raise rents, otherwise they make a loss.
According to recent NVM data, the average rent for an apartment in the free sector in the first quarter of 2023 was 15.81 euros per square metre. For an average apartment of 70 square metres, that comes to a monthly rent of 1,106 euros. Interestingly, more than 70 per cent of rental homes in the free sector are classed as mid-rent homes, with a rent of up to 1,100 euros.
What stands out is the considerable growth in the number of mid-rent homes over the past ten years. This number rose from 220,000 in 2012 to 460,000 in 2021. This growth was possible without the regulation and the enormous tax burden. For investors this was interesting. Most people think they only bought apartments from under the noses of first-time buyers. That was partly true. But we forgot how many apartments were also being created. Gé was working on a shop with a warehouse in Venray. It hadn't been measured correctly, so the sums didn't add up: they were 1 m² short of being able to create 6 apartments. But they were keen to turn an old, dilapidated building into 6 great apartments. We were already busy drawing up plans. Quite a few people had already contacted his parents saying they'd like to rent there. But because of that 1 m², the plan didn't work. No subsidy and one apartment fewer. It's now a warehouse again, standing half empty. Such a terrible shame. Because they would have been mid-rent and social rent apartments.
Statement 3: Living in the city is unaffordable
The rent-to-income ratio in Amsterdam is 34.6 per cent, in Utrecht 32.7 and in Rotterdam 32.3. The national average rent-to-income ratio is 25.6 per cent. Renting is more expensive. But renting is also flexible. Yesterday I spoke to someone who is now renting an apartment in the centre of Amsterdam. An apartment with one bedroom, outdoor space and a living room with an open-plan kitchen. Buying isn't an option for her. She would have to leave the city, or she could only afford a studio, and then her monthly payment would be even higher. Yes, when you rent you don't pay anything off, but the monthly payment for a comparable home would be higher. So renting is more expensive, but not unaffordable relative to income.
In the Netherlands we have a crazy amount of social housing. We have the most social rented housing in the whole world. Germany really is a country of renters. But even there they have considerably less social housing. Between 30 and 35% of homes in the Netherlands are social rented housing. In Amsterdam only 29% of homes are owner-occupied, while in Utrecht it's no less than 44%. According to figures from Brainbay, 32% of homes in Utrecht are social rented housing, and in Amsterdam no less than 40%. So in these cities you either live ridiculously expensively or, in fact, too cheaply for what a home costs. Cities also have relatively many social rented homes. In Rotterdam almost half of the housing stock is social rented housing.
Statement: All investors are rogue landlords
I'm genuinely worried about my pension. Because if I put my money into a pension fund, it won't be worth anything by the time I can retire. Because of my illness I'll probably have to stop earlier. If I put it in a savings account, with this inflation combined with interest rates and regulation, I certainly won't have enough. Buying a home in the Netherlands isn't really feasible any more. So we bought a house in Spain instead. We bought an office building and wanted to expand slowly. So I was really excited about those 6 apartments in Venray. I'd already picked out lovely kitchens and bathrooms. And that's how a lot of people came to us. They wanted to build up a pension pot and be proud of their property.
Of course there are real rogue landlords, and it's good that they're being tackled. But many people provided a nice home and saw this as a way of building up their pension. They took risks and invested. That isn't popular; it's better for all of us to really lay into these rogue landlords. That solves the problem..
Of course I was annoyed too when an investor snatched a lovely house from under my nose. The buy-to-let protection already existed when I started working in estate agency. But because houses were barely selling, we desperately needed those investors, and the buy-to-let protection was scrapped in Utrecht. This could have done with a bit of regulation. But, for example, you might well want to rent a house in Overvecht for a few years, while perhaps preferring not to buy a house there. Most free-sector rental homes fall into the mid-rent segment. In addition, half of the more than 1 million rental homes owned by investors fall into the regulated segment. In urban areas, 80 to 85% of residents are satisfied with their home.
Statement 5: Investors don't pay tax
Box 3 was the party box, the fun box, a gift for the rich. Fact: the tax burden on letting is ten times higher than on buying: roughly 2 per cent of the WOZ value through the Box 3 levy for tenants/landlords, compared with 0.2 per cent through the eigenwoningforfait (the notional rental value added to a homeowner's income) for owner-occupiers. And that's on top of the transfer tax of 10.4 per cent. So landlords are already taxed much more heavily than owner-occupiers. And yes, it used to be a lot less. But at the moment it's barely affordable. Only if you've owned a somewhat larger home for a very long time can you ride it out. The rules of the game keep changing during the game.
From pride to selling up
I read Ebru's blog. An investor who owned property to build up her pension. She was proud of her property. She even held drinks and barbecues for her tenants. Ebru was involved and had big plans. In her opinion, selling was for people with a short-term vision. She had a long-term vision. She gave the example: you wouldn't lend your car to a complete stranger without insurance and guarantees, would you? Now you have to lend your house to complete strangers for an indefinite period in return for a fee. But you don't even know yet whether you'll get on and whether you can trust your tenant. That's crazy, isn't it?
We too see investors leaving the Netherlands and renovating their homes. Gé and a friend made an Excel file for clients to see whether letting their home could still pay off. Some still dared to go for it, but a number of them decided to sell after all. Something that hurt them quite a bit. But well, with all those changing rules, and soon having tenants who never leave and having to top up every month… They just don't fancy that.
When we posted a photo on Instagram of the house we bought in Spain, I think we got around 10 messages from clients and former clients. Say, are you getting into property in Spain too? Can I come over for a coffee? I find this interesting too; in the Netherlands I can't make the numbers work any more…. And of course. On Friday I spoke to someone in the pub. He has a really impressive property portfolio, bought a long time ago, and he's done some really good things. He has some margin. He's proud of it. But these days he focuses on really great projects that aren't within reach for most people. Those who are young and want to build up a pension, and those who didn't start so young, will really have to find their returns elsewhere.
How our house prices differ from those in other countries
Last year we spent two weeks in Antwerp. I love that city. Dad also has a business in Belgium. It feels a bit like home. We stayed in a lovely apartment, and Mum and Dad often stay in Belgium when he has to work there. We gawped at the beautiful apartments in the estate agents' windows. How nice it would be to buy something here. I think it was mainly the beautiful apartments with their low prices that made me greedy.
In Spain the same thing happened again. We stood in front of the shop windows and looked on Idealista. Those prices were so favourable compared with ours… I wondered how that could be. In Spain you can only finance 80% of the home's value. In the Valencia region you also pay 10% transfer tax, and then the costs of a lawyer and the notary come on top of that. In Belgium you can finance 90% of the home's value and the transfer tax is between 6 and 12.5%. People have to bring much more of their own money to buy a home. Our house prices are based on our borrowing capacity. With around 5% of our own money we can buy a house in the Netherlands. This is strongly encouraged, but it does mean our prices rise enormously.
We bought a little house in Spain. Once again it's old junk. It was built in 2001, but if you said 1980 you'd believe it too. We don't have the money to turn it into our dream home straight away. But after researching the market there, it seemed smart to us to get in. We're doing the little house up. There's potential to turn it into a really lovely home, and that way we can build up. Yes, of course I also dream of a gorgeous villa with an infinity pool. But we can't all have a perfect start. If your wish isn't within reach yet, you'll have to take intermediate steps to get there.
Conclusion: between dreams and reality
The developments in the Berlin rental market reflect the challenges facing cities around the world. While regulation is pursued to guarantee affordability, policymakers also need to consider the consequences and potential pitfalls of such measures. The housing market is complex. But it should be stimulated rather than regulated. Then extra homes will be added. I've written before that we live in homes that are too big. In the Netherlands we're really spoilt, too. The Randstad isn't the only place where you can live, have to live and have the right to live. We'll have to be more creative. The housing market is complex. Between visionary dreams and reality, property owners, tenants and policymakers have to find a balance that does justice to everyone involved.
Looking for a house? Good luck. Put your dream home on hold. Make a plan for how to get there. Go for the intermediate step. A house where you feel safe. Do you really need that second or third bedroom right now? Or is it cheaper to rent a flexible workspace for working from home? Prices are rising so fast at the moment that you'd better buy a house quickly. Make do for a while with a house with a downstairs bathroom and an old kitchen. Over time you move that bathroom and extend the house. And you've still got a dream home ;). Take a look at our listings.
P.S. Just a few last figures… Over the past few months house prices in Utrecht rose by between 1.8 and 5% per month. Interest rates fell and borrowing capacity rose. I'm curious what next month's figures will be. In January buyers overbid by an average of 5.3%. The average house price in Utrecht was €490,000. Where will this end?
