Housing shortage in the Netherlands increases further and will grow until 2020

5 February 2018

Analysis Dutch residential market

The housing shortage in the Netherlands will continue to rise until 2020. Where it was previously expected that the shortage would be at its peak from the end of 2018, the shortage is now expected to last longer and to increase to possibly 235,000 homes in 2020. Construction levels remain insufficient to close the gap between supply and demand. Especially starters and senior citizens are in trouble. Both target groups will grow considerably in the coming years. However, not enough suitable homes are being built to meet this growing demand. In particular, more owner-occupied dwellings and mid-priced rental dwellings must be realised. In the mid-priced rental segment, annual demand exceeds supply by an estimated 83,000. This is clear from research conducted by Capital Value in cooperation with ABF Research.

Housing shortage reaches peak in 2020
For a number of years, the production of new homes has lagged behind the growth in the number of households. In 2017, 65,000 building permits are expected to have been issued, while the growth in the number of households was the highest in 10 years (+82,000). The statistical housing shortage is higher than expected at the start of 2018 and amounts to 205,000 homes. The peak may not be reached until 2020, with a shortage of possibly 235,000 homes. Only from 2020 is it expected that more homes will be built annually than the number of households will increase. In particular, the tension will increase further in the Randstad and parts of Gelderland and Brabant.

More new houses necessary, building sector lacks capacity
In order to reduce the housing shortage to more normal proportions (–1.75%) in the next five years, the estimated expansion of the housing stock will have to be increased considerably. On top of the expected increase of 303,000 homes, some 50–60,000 homes will be needed. On an annual basis, the expansion should increase by at least 12,000 homes, which amounts to approximately 85,000 new homes per year instead of the expected 73,000. In addition to a deficit in planned stock in the short term, the construction sector is suffering from a large shortage of capacity, including labour and building materials. Based on the current data, it is unlikely that the market can achieve this increase.

Young professionals in trouble
In the period up to 2022 the number of households between 25–34 years will increase significantly (+60,000). Every year, more than 90,000 students graduate from a university or higher professional education institution and approximately 100,000 vocational education students complete a full-time study with a diploma. The incomes of these recent graduates are relatively low and many do not have a permanent contract. Only 35% of higher professional graduates and 30% of university graduates have a permanent employment contract after 1.5–2 years. Buying has become increasingly difficult for this target group. Some young professionals qualify for a regulated rental home, but a considerable proportion are dependent on the mid-priced rental segment, the segment where the shortages are the highest. In recent years, many studios have been built for starters in the cities, but in the long term, larger homes with 1 or 2 bedrooms will also be needed for this target group.

Number of seniors with mobility restrictions increasing substantially
The number of households aged 75 and older is increasing the most, both in absolute and relative terms. From 2018 to 2022, it will mean an increase of 200,000. It mainly concerns single-person households. Over the next five years, the number of people aged 75 or older will increase the most in Flevoland and in 'Kop van Noord-Holland', where the increase will be more than 30% (on average the number of people aged 75 and older will increase by 23%). The number of households of 75 years and older with mobility restrictions will increase by 103,000 over the next 5 years.

A specific building programme will be necessary for this rapidly growing target group. In recent years, not enough homes have been built, which makes it difficult to find suitable accommodation. It is positive, though, that a growing number of investors want to invest in homes for seniors. For 2018, investors indicate that they will have approximately 1.5 billion euros available for investments in this segment. In addition, 95% of the surveyed housing associations with healthcare real estate believe that they should play a role in the realisation of care and senior housing in the regulated segment. 62% indicate they want to invest in new developments for the elderly, expecting to realise around 3,000 care units in the coming 2 years.

Kees van Harten, managing director of Capital Value: "The motto should not just be 'build, build, build'. In order to eliminate the shortages in a future-proof manner, it is very important that the constructions be demand-driven. When making plans, it is important to look critically at who we are building for (target group), in which segment more homes are needed (owner-occupied or rental) and in which region, also taking into account future demographic developments. In addition, the market must embrace Rob van Gijzel's initiative to work together to solve the problems, not only at local level, but also at regional level. Although there are critical comments on a number of recommendations from the report 'Samen Bouwen aan Middenhuur (Building together for the mid-priced rental segment), strategic cooperation between investors, local municipalities and housing associations is a necessity to reduce the housing shortage".

Supply and demand mismatch
There is more demand than supply in almost all segments. However, the demand most exceeds the supply in the non-regulated rental segment. With an annual supply of an average of 110,000 homes, approximately 193,000 are needed. The demand is therefore 76% higher than the supply. This also has consequences for rent increases. If there is more supply, rental prices will also increase at a slower pace.

Many investments in 2017, but capital is not used
In 2017, a record amount of 5.5 billion euros was invested in Dutch rental housing. However, billions of euros were not invested because of the lack of supply of existing complexes and new construction projects. Dutch pension funds alone indicate that they have been unable to invest 1.5 billion euros in Dutch rental housing.

Record capital available in 2018
For 2018, the Dutch and international investors surveyed jointly indicate that they have more than 7 billion euros available for investments in Dutch rental housing. Never before has so much money been available for the Dutch housing market.

Housing associations can play an important role
Many of the housing associations want to and can build more homes in the coming years. However, approximately 63% indicate that they have insufficient landholdings to be able to realise new plans. In addition, approximately 27% indicate that insufficient cooperation from the local municipalities is a reason for not being able to realise new buildings. It is important that municipalities offer housing associations the opportunity to build smaller social housing for starters and senior citizens so that housing associations can sell larger (more expensive) homes and use the funds released for new investments. In this case, the record amount that investors have available can also be used.

Marijn Snijders, managing director of Capital Value: "The upcoming local government elections can play an important role in reducing the housing shortage. Coalition negotiations should not lead to delays in town and country planning procedures. Municipalities must include the mid-priced rental segment as top priority during the coalition negotiations. In addition, municipalities will also have to accept lower land prices if they want to secure non-regulated and mid-priced rental dwellings in their district.

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