introduction

Contrary to earlier predictions, the COVID-19 crisis has not resulted in a negative price development for residential properties.

Instead, records for price increases are being broken in the residential market. In the second quarter of 2021, owner-occupied homes were 18.2% more expensive per sq m than in the second quarter of 2020. In the private sector rental market, rents for unfurnished and floorless homes have also risen, although not quite as significantly as in the owner-occupied housing sector. In the second quarter of 2021, rental properties were 9.2% more expensive than in the second quarter of 2020. Because wages rise more slowly than the above-mentioned percentage increases, affordability is impacted.

The call to build more residential real estate is becoming louder partly due to sharply rising purchase prices. The motto ‘build, build, build’ is frequently mentioned as a response to these rising purchase prices. For the next ten years, the goal is to build 100,000 extra homes instead of the 75,000 estimated a year ago. The focus appears to be more and more on building for the owner-occupied housing market. Is there a greater need for more owner-occupied homes than rental homes? And, where can they be built?

The need for owner-occupied homes does not appear greater in terms of affordability. Households renting in the private sector still use a considerably larger part of their disposable income for housing than buyers, at 42.6% compared to 29%. The additional government regulations introduced in 2021 to make the rental sector more affordable, are a testament to this need.

It also shows the government does not lack willingness to take action in the rental market. Market parties are also ready to invest in this segment, as shown by the increasing capital available for this purpose1. Both can and want to play a role in increasing the affordability of the rental sector, partly by investing in new-build. The statement “as market parties and governments, we must work together to invest in the ‘mid-priced rental sector’” is not new, and has been made before, unfortunately so far with limited results. This may be caused by a lack of understanding of what is truly necessary.

Where is the need currently highest for new private sector rental homes? And what are market parties and governments currently doing to either increase the offer or improve affordability or both?

Where is the need currently highest for new private sector rental homes? And what are market parties and governments currently doing to either increase the offer or improve affordability or both?

NEXT TOPIC

Shortages are rising in urban locations

For our Dutch readers – listen to the latest episode of our podcast De Onderste Steen:

There is persistent shortage of houses in the Netherlands – housing and rental prices are rising significantly. What do the investors think about these developments? Is it still worthwhile to operate in this market, or is the financial return too low? And how can investors be part of the solution to the housing shortage? Charlotte Harmsen will discuss this with Simon Kuijs, Investment Manager at Heimstaden, a leading residential real estate company.

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