Free sector rents skyrocketing due to scarce supply; Up 8% in fourth quarter

The average rental price of a home in the private sector increased by over 8 percent on an annual basis in the last months of 2023. That means that the national square meter price exceeded 18 euros for the first time, according to the housing platform Pararius. The platform attributes the rent increase to the increasingly scarce supply in the private sector. These homes are increasingly disappearing into the owner-occupied market.

While 7 percent of the purchase supply in the third quarter still consisted of former rental properties, in the fourth quarter, that was already almost 8 percent. “The increasing shift from rental to owner-occupied homes, which has been felt by the market for some time, is leading to a further reduction of the already scarce rental supply in the private sector,” said Pararius director Jasper de Groot.

At the same time, the total number of available rental properties in the private sector is declining more sharply. Pararius said that supply fell by almost 16 percent in the last three months of 2023 compared to the same period a year earlier. Tenants of a home in the private sector paid an average of 18.01 euros per square meter, compared to 16.59 euros in the last quarter of 2022. “What we see here is that in a market of supply and demand, the rent is increased if the rental supply decreases,” De Groot said.

Pararius looked at the average square meter price in the five large cities and 60 medium-sized towns. It emerged that rents have risen in four out of five and almost 80 percent of towns, respectively. Pararius saw the strongest rent increase in Deventer, with an average of nearly 19 percent. In the large cities, the average rent rose the most in The Hague, by 8.4 percent. In Eindhoven, the rent fell by 1.4 percent.

According to the housing platform, the larger supply of owner-occupied homes can be positive for people starting out in the market. But according to De Groot, the reality is more complex. For example, the rental market in the private sector is eight times smaller than the purchase market, he said. And, in addition, many first-time buyers find it difficult to finance a home. “Starters then have to rely on the private sector rental market, where supply is declining, and rental prices are rising sharply as a result.”