Rental homes' value to drop 16% by end 2024: ABN Amro

Rental homes will decline sharply in value this year and next year, ABN Amro expects. According to the bank’s real estate experts, this is the result of stricter rent regulation by the government, combined with high interest rates, making it more difficult to finance these properties.

The price of rental homes is expected to drop by 11 percent this year and by another 5 percent in 2024. Prices will not stabilize until 2025. “There is a lot of uncertainty in the real estate sector about the upcoming extension of rental price protection to the middle segment. This uncertainty now makes it less attractive to invest in these homes,” said Paul Bisschop, a real estate economist at ABN Amro.

Outgoing Housing Minister Hugo de Jonge wants to regulate the rental market more to better protect tenants. “The downside is that it becomes less attractive to earn money from it. And that causes all kinds of side effects, for example, that supply will decrease, and rents that fall outside the regulated segment will probably increase,” said Bisschop.

The economist called the timing of the regulatory measures very unfortunate. “We have a major housing shortage, so what you should certainly not do is discourage parties from investing in this. Drastically limiting the return of investors will probably be counterproductive in the coming years,” said Bisschop.

He pointed out that measures have already been taken to regulate the rental market, such as increased transfer tax for investors, several municipalities banning home buyers from immediately renting out a purchased home, and the tax treatment of rental properties. “My advice would be: first monitor what those previous measures do, ensure stability and security for investors in the long term. If the measures still lead to excessive rents, then take a targeted approach. But do not immediately change and restructure the entire system,” the economist concludes.

ABN Amro predicts that the entire commercial real estate sector will decline in value by 10 percent this year and 3.5 percent next year. That is partly due to the slowdown in the economy. Prices are also under pressure because many investors are faced with high interest rates when refinancing. As a result, some investors are forced to sell their properties.