Suitability of locations in the Netherlands for residential investment

Randstad and large regional cities are key these days

The consequences of extending the WWS point system from 2024 will be that the Dutch residential market will increasingly become the domain of the “core” investor. For the mid-range segment, the capped rents in conjunction with limited rental growth will provide a constant, but also lower, return. At the same time, there will still be a “more expensive” rental product in which the initial rents will not be regulated. This segment will then be more limited to larger, better-quality homes, and more often located in relatively expensive locations such as the Randstad.

As the already limited supply of non-regulated rental housing is likely to shrink, an increase in the market rent is to be expected

Investors in Dutch housing will therefore have to deal with two challenges, also depending on the investment strategy.

For ‘core’ investors targeting the regulated mid-rental segment as of 2024, it will become pertinent to look at where risks are limited, but where sufficient returns can still be achieved. For investors who continue to focus on the liberised rental sector, locations with strong fundamentals such as high demand for residential space will remain significant.

To determine which locations are the most worthwhile from an investor's perspective, Savills uses the Savills Market Indicator 3. It uses 39 indicators to measure the potential of an area at the neighbourhood level for residential investment. The map below shows the results. The map shows that particularly the cities in the Randstad achieve a high score, with Amsterdam at the top. This should not come as a surprise: these cities score high on indicators such as expected population growth, realised investment volume — which indicates that the market is very liquid, and various economic indicators such as growth in business activity.

It has to be noted however, that the attractiveness of Amsterdam can alter for particular investors depending on the extent of the upcoming regulation. Extending the point system for social rent towards a base rent of €1,250 max. instead of €1,000 likely results in a less attractive risk-return profile.

Although neighbourhoods with scores in the top 10% of all neighbourhoods in the Netherlands are mainly located in the Randstad (1,305 out of 13,502), it is clear that many large regional cities outside the Randstad might also be seen as very appealing. There are 16 neighbourhoods in both Arnhem and Nijmegen that rank in this 10%. Cities in Brabant also score well: 74 neighbourhoods in Eindhoven and 20 in Breda are part of the neighbourhoods with scores in the top 10%. This is mainly due to high scores in the areas of quality of life and demographics. Therefore, these cities may lend themselves as an alternative to the larger cities in the Randstad, as there is less competition there but strong foundations for the local residential and rental market.

Source 3 The Savills Market Indicator collects data on six areas from internal and external sources and compares this data to determine the appeal of a particular area. Statistical methods are applied to compare and rank the areas of "Quality of life", "Sustainability", "Mobility", "Demographics", "Economy", and "Housing market", which give a quantitative indication of the potential of an area.

Map Outside the Randstad, large regional cities score high in terms of attractiveness for residential investment



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