Private real estate investors benefited from tighter mortgage standards: study

Private real estate investors have benefited greatly from tighter mortgage debt limits for homebuyers, as a portion of house seekers could no longer buy properties and had to rent in the free sector housing instead. This is the conclusion of the Central Planning Bureau (CPB) in a study reported by Het Financieel Dagblad on Tuesday.

The study was conducted in response to concerns about tenants facing expensive rentals. CPB aimed to assess the extent of the issue and its relation to lending standards.

Following the 2008 crisis, Dutch mortgage guidelines were revised to prevent excessive borrowing by homebuyers. By 2018, a household earning twice the modal income could allocate only 24 percent of its gross income to mortgage costs, a decrease from 36.8 percent in 2008.

Lending standards influenced the decision to buy or rent between 2013 and 2019. The number of free-sector rental homes grew by 70 percent compared to owner-occupied homes. The CPB attributes a fifth of this rise to reduced borrowing capacity for mortgages. This led investors to purchase these properties.

"Buyers were able to offer less, and investors were given more opportunity in the market as a result," explained program leader at CPB Emile Cammeraat to the newspaper.

The study also reveals that under current lending standards, 25 percent of renters in the free sector cannot afford to buy a similar home to their rental home. This figure exceeds half for tenants with a modal income in the free rental sector.

While buying is not interest for all, the CPB noted that homeowners in the Netherlands benefit from tax benefits like the mortgage interest deduction, which renters do not access.

According to the CPB, relaxing mortgage standards will not benefit first-time homebuyers, as it would mainly drive up house prices without increasing the housing supply. Measures discouraging renting, like buy-back protection, have limited impact. Instead, increasing housing construction and reducing mortgage interest relief would be more beneficial, according to Cammeraat.