Free sector rents continue to decrease, but not in the large cities

The average square meter price for a rental home in the free sector decreased by 1.1 percent in the fourth quarter of 2022, continuing the slight downward trend that started in the first quarter of last year. That trend is not visible in the five large cities, where free sector rents continue to soar. In Amsterdam, rents increased by 10.9 percent in the fourth quarter, housing platform Pararius reported.

In Q4 of 2022, new tenants in the Netherlands, on average, paid 16.59 euros per square meter for a rental home in the free market. That was 1.1 percent less than the same quarter a year earlier. The national rent development has been showing a downward trend since the start of 2022.

But that trend is not visible at all in the five large cities. According to Pararius director Jasper de Groot, that has to do with a mismatch between supply and demand. The larger cities have all taken measures to discourage buy-to-let, but the demand for rentals remains high.

“In large cities such as Amsterdam and Rotterdam, the rental offer is declining rapidly. We hear from the market that many private landlords currently feel compelled to sell their rental homes because renting out will soon no longer be profitable,” De Groot said. And as demand is only increasing, “prices at the city level are rising sharply.”

Amsterdam stood head and shoulders above the other cities in the fourth quarter, both in terms of square meter price and percentage price increase. Rents in the capital increased by 10.9 percent to 25.75 euros per square meter per month. “What is happening in Amsterdam is pure market forces: supply and demand are becoming increasingly out of balance, which means that prices rise,” De Groot said. “We hear from the market that many investors are withdrawing from Amsterdam and selling their rental properties, which explains the declining rental supply.”

In The Hague, rents rose by 5.9 percent to 17.95 euros per square meter per month, in Rotterdam by 2.3 percent to 17.50 euros, in Eindhoven by 6.7 percent to 17.91 euros, and in Utrecht by 1 percent to 19.30 euros.

The decline in available free sector rentals is visible nationwide, Pararius said. The number of free sector rentals that became available in the fourth quarter was 8.9 percent lower than a year earlier. According to the housing platform, that is terrible news for middle-income tenants in the Netherlands, who earn too much for social housing but not enough to buy a home.

“The free sector rental market is very tight, with only 8 percent of the total housing stock. And that tightness will increase further if the Cabinet’s plans to regulate the mid-rental segment go through,” De Groot said.