The house price boom continues to strengthen
Lalaine C. Delmendo | February 03, 2022
In Amsterdam, the capital, the price of existing homes rose by 11.5% during 2021 (9.4% inflation-adjusted), to an average of €569,890 (US$627,865), according to Statistics Netherlands (CBS) - the highest price rise ever recorded and the eighth consecutive year of annual rises. Nationally, the average house price rose by 15.6% (13.4% inflation-adjusted) to €386,714 (US$428,181) in 2021 from a year earlier, following y-o-y rises of 8.6% in 2020 and 7.2% in 2019.
All property types rose in price, nationwide, during 2021.
- Apartment prices rose by 15.3% (13.1% inflation-adjusted), to an average of €341,061 (US$377,618), sharply up from the prior year's 8.2% increase.
- Terraced house prices rose by 15.5% (13.3% inflation-adjusted), to an average of €354,068 (US$392,019), following a y-o-y increase of 8.2% in 2020.
- Detached house prices surged 17.1% (14.9% inflation-adjusted), to an average of €571,721 (US$633,001), sharply up from the prior year's 9.7% growth.
- Semi-detached house prices increased 14.1% (11.9% inflation-adjusted), to an average of €401,935 (US$445,016), up from a y-o-y rise of 8.6% in 2020.
- Corner houses saw price increases of 14.7% (12.5% inflation-adjusted), to an average of €368,441 (US$407,932), up from the prior year's 8.8% rise.
After a housing boom lasting almost 15 years, the Dutch housing market weakened in 2008, and only began to recover in 2014. From Q1 2014 to Q4 2019, house prices rose by almost 40% nationally, with very strong increases in Amsterdam (77.4% growth) and Rotterdam (61.8% growth). Despite the Covid-19 pandemic, nationwide house prices rose by a huge 27.3% in the past two years.
Rental yields remain attractive in The Hague
Gross rental yields from apartments in the Netherlands continue to be attractive. The returns on investment are not princely - but they beat those in many other countries, especially given the excellent security of the Netherlands, its stability, rule of law, generally vibrant economy, and good long-term prospects.
In Amsterdam, yields on apartments range from 3.7% to 5.3%. As usual, smaller apartments return higher yields than larger.
In The Hague, yields range from 5.6% to 6.4%.
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.
Taxes are generally high in the Netherlands
Rental Income: The income tax on renting residential property is quite high, though the tax is not really an income tax. In reality it is a flat tax, with 31% levied on the assumed rental yield. As of 2017, the applicable deemed rental yield depends on the value of the assets.
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. 31%.
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.
Total transaction costs are moderate in the Netherlands
Total transaction costs are between 6.63% and 9.86% of the total dwelling price for existing houses, which is moderate by international standards. The bulk of these costs are paid by the buyer, including the transfer tax,legal fees and registration fees. Real estate agent’s commission at 2% to 4% (plus 21% VAT) is shared between buyer and seller.
If the property is newly constructed (or less than two years old) the transfer tax is replaced with the 21% VAT.
Almost impossible to evict tenants in the Netherlands
Dutch rental market practices are pro-tenant.
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.
Dutch economy recoveringThe Dutch economy grew by 4.8% in 2021 from a year earlier, buoyed by a rebound in household consumption and exports, as well as public consumption and investments, based on figures from Statistics Netherlands. However it was slower than most of its neighboring countries and lower than the EU average of 5.2%.
The Dutch economy is heavily dependent on foreign trade, with exports accounting for 83% of the country’s GDP, making the economy very susceptible to external shocks. For instance the euro crisis sent the Netherlands’ economy into a recession in 2011 which continued in 2012 and 2013, with economic contractions of 1.1% and 0.2%, respectively. Then in 2020, the COVID-19 pandemic caused the economy to contract by 3.8% - its worst showing in recent history.
The Dutch economy grew by an annual average of just 1.4% from 2010 to 2019.
The economy is projected to grow by a modest 3.4% in 2022, according to Fitch Ratings.
The Dutch government recorded a budget deficit of around 6% of GDP last year, up from a 4.3% shortfall in 2020 and in sharp contrast to a surplus of 1.8% in 2019. It is now twice the allowable limit under the EU rules.
Gross public debt was estimated to have risen to about 57.7% of GDP in 2021, up from 54.5% in 2020 and 48.7% in 2019. Yet it remains slightly below the permissible upper limit of 60% stipulated by the EU Stability Pact.
Inflation stood at 6.2% in February 2022, sharply up from the previous year’s 1.8%, mainly due to the surge in energy prices. Inflation averaged just 1.6% from 2011 to 2021.
Unemployment fell to 3.6% in January, the lowest level since 2003 – the first year for which monthly figures became available. Joblessness averaged 5.3% from 2011 to 2021.