In July 2014, the prices of existing homes sold in Netherlands rose by 1.9% y-o-y, the fourth consecutive month of annual price hikes in nominal terms, according to Statistics Netherlands (CBS). When adjusted to inflation, house prices rose by 1% over the same period.
Almost all cities and municipalities showed house price growth during the year to end-Q2 2014.
- In Amsterdam, the price of existing homes rose by 3.5%, more than the 2.6% y-o-y price increase during the first quarter, and a considerable improvement from 5.5% y-o-y decline in Q2 2013, and on the average price drop of 5.2% in 2013.
- In Rotterdam, house prices increased by 4.1%. This was the first price hike after 9 consecutive quarters of y-o-y price declines, including the previous quarter’s 0.2% y-o-y decline. In 2013, house prices in Rotterdam fell by an average of 5.5%.
- In Groningen, the price of existing homes fell by 0.1%. However, the decline was small compared to the previous quarter’s 4% y-o-y drop, and an improvement from 2013’s average price decline of 5.4%.
- In Zuid-Holland, house prices rose by 1.7% during the year, the first price hike after 20 consecutive quarters of price declines, including Q1 2014’s 1.2% y-o-y decline. House prices in the area had an average price drop of 6.1% in 2013.
- In Noord-Brabant, the price of existing homes rose by only 0.5%, up from previous quarter’s 2% y-o-y drop. Despite the meager growth, it was rather a progress from a 21-quarter y-o-y price declines before it. It was also a huge improvement from 2013’s average price decline of 7.2%.
The upward trend of house prices is supported by data coming from Dutch Association of Real Estate Agents (NVM). The average house price in the Netherlands rose by 3.5% during the year to Q2 2014 to €215,000 (US$ 283,542). As compared to the previous quarter, the average price of homes rose by 1.7%.
After a housing boom lasting almost 15 years, the Dutch housing market started to weaken in 2008, mainly due to the global financial meltdown. Based on NVM’s figures:
- In 2008, house prices fell by 0.08%% (-2.2% in real terms)
- In 2009, house prices dropped by 7.3% (-8.2% in real terms)
- In 2010, house prices rose by 3.3% (2.4% in real terms)
- In 2011, house prices dropped by 2.1% (-4.4% in real terms)
- In 2012, house prices fell by 7.6% (-10.1% in real terms)
- In 2013, house prices dropped by 2.4% (-4.9% in real terms)
Demand has strengthened surprisingly strongly. Property transactions rose by 54.1% in Q2 to 34,074 units from the same period last year, according to Statistics Netherlands (CBS).
The Netherlands' largest realtor NVM also saw a significant increase in home sales, with around 29,216 units sold in Q2 2014, 20.1% up on the first quarter.
“This does suggest that the market is now really past its worst point," said NVM chairman Ger Hukker. "NVM brokers achieved sales of over 100,000 homes in the last four quarters, a level we have not seen in the past five years.”
Despite the increase in sales, according to Hukker the housing market still has a long way to go before reaching full recovery. The market is now supported by pent-up demand, supported by new policy measures, including the relaxation of gift tax and starter loans.
Analysis of Netherlands Residential Property Market »
In Amsterdam, yields on apartments range from 4.5% to 6.4%. As usual, smaller apartments return higher yields than larger.
In The Hague, yields in range from 4.8% to 7.4%.
The Hague is a less expensive city to buy in, and really merits consideration by investors. First, it is the seat of government, so most foreign embassies in the Netherlands and 150 international organisations are located in The Hague, including the International Court of Justice and the International Criminal Court. Several large international businesses have their headquarters in The Hague, including Shell, the world's second largest company in terms of revenue. This means that there is an ideal group of expatriate tenants to whom owners can rent their apartments, as 26% of the jobs in The Hague are either offered by the Dutch government or by international institutions. In addition, for those interested in the short-term rental market, tourism is important, with 1.2 million tourists a year.
English is spoken virtually everywhere in the Netherlands, and non-Dutch speaking property investors from abroad will experience no difficulty navigating the environment.
Round trip transaction costs are mid-range on residential property in the Netherlands, see our Netherlands transaction costs analysis and our Netherlands transaction costs compared to other locations.
Capital Gains: For the sale of real estate that was used as part of a rental business enterprise, capital gains are taxed as part of income in Box 3 i.e. 30%.
Inheritance: Wealth acquired by inheritance from an individual who has properties in the Netherlands is subject to inheritance tax. Different rates apply, depending on the relationship between the heir and the testator where there are three categories.
Residents: Residents are taxed on their worldwide income.
If the property is newly constructed (or less than two years old) the Transfer Tax is replaced with the 19% VAT.
Rent: Landlords can set the rent freely and adjust the rent, for properties above the ‘liberalization rent limit’ of €604.72 per month. A deposit of two to three months is customary.
Tenant Security: The most dangerous aspect for a landlord in the Netherlands is that once a property has been rented, tenants are almost impossible to evict. The basic Dutch rental contract is one of unlimited duration. Landlords can only give notice in strictly defined cases, and it is extremely difficult for owners to evict tenants once they are established.
The euro crisis has affected Netherlands, sending its economy back to recession in Q4 2011. The recession in Netherlands continued in 2012 and 2013, with economic contractions of almost 1.3% and 0.8%, respectively.
Netherlands’ economy is expected to grow by ¾% in 2014, followed by a 1 ¼% growth in 2015, according to the CBP Netherlands Bureau for Economic Policy Analysis.
Based on the central bank’s (DNB) semi-annual forecast in June 2014, the country’s economic recovery will be maintained. But the country will underperform in 2015 and 2016, as the decline in natural gas production continues. The bank predicts 1.6% growth in 2015 and 2016, due to the recovery of domestic spending.
The increase in consumer and producer confidence signals an economic recovery. However, Job Swank, DNB’s monetary affairs and financial stability director, believes that political instability in eastern Europe, particularly the tensions between Russia and the EU, could affect Netherlands’ economic growth.
The country experienced uninterrupted growth for 26 years from 1982 until 2008, with an unprecedented boom in the latter half of the 1990s. There was low inflation, strong exports and virtually no unemployment.
But one legacy of the boom years was the huge mortgage debt.
The national debt is also high. During the recession, the government boosted the economy through stimulus programs and bank bailouts, resulting in a budget deficit of 4.6% of GDP in 2009, 5.1% of GDP in 2010 and 4.8% in 2011. As a result, the country’s debt rose to 65.2% of GDP in 2011. In 2012, the national debt rose further to about 71% of GDP, far higher than the permissible upper limit of 60% stipulated by the EU Stability Pact. The Netherlands’ national debt rose to 74.3% of GDP in 2013 from 71.3% of GDP in the previous year, while its budget deficit was recorded at about 3.3% of GDP.
The government plans to implement €6 billion in austerity measures in 2014, equivalent to about 1% of the country’s GDP. This is on top of a four-year, €16 billion austerity package approved in November 2012 when Prime Minister Mark Rutte took office.
Unemployment remains high at 8.2% of the labour force in July 2014. The IMF projects a 7.3% unemployment rate for the full year 2014, up on the 6.9% rate recorded the previous year.
In July 2014, inflation rate in Netherlands was stable at 0.9%, same as in June 2014, according to the CBS.