Second wave of rental housing sales coming, real estate companies warn
The Netherlands will see a second wave of rental properties sold into the owner-occupied market next year, 12 large real estate companies warned in a letter about the 2025 Tax Plan. In the past year or two, many small investors put their rentals up for sale as soon as the tenant moved out due to cuts to tax breaks and plans to regulate mid-market rentals. Next year, large and medium-sized landlords will start doing the same, the Telegraaf reports.
Most larger landlords have partly financed their properties with loans. Currently, they can deduct up to 1 million euros in interest from their corporate tax per private company. In the 2025 tax plan, the 1 million euro threshold is removed, and investors can only deduct up to 20 percent of their profits.
That puts larger investors at risk, Huib Boissevain, CEO of real estate investor Annexum, told the newspaper. “The sales will, therefore, be done by private companies, not just by small investors. But you also have many retirees who have, say, three apartments in a private company and are affected by this.”
Tax specialist Jelle Bas Boon of consultancy firm Deloitte explained how the new rules will impact private companies. An investment of 400 million euros in homes, half of which is borrowed money, currently yields an annual profit of 4.5 million euros. The limitation of interest deduction brings that profit to 2.7 million euros - not enough to pay the yearly repayment of 4 million euros. So, in principle, the investor will sell.
Real estate advisor CBRE can see the sales wave coming. “We are now just before the sales wave. That gets much worse when I see the requests we now receive at CBRE to do this. We see a strong withdrawal of investors, including foreign pension funds,” Frank Verwoerd of CBRE told the Telegraaf.
The Senate will likely adopt the Affordable Rent Act, which regulates mid-market rentals, this month. Verwoerd said that will slow down the flow in the housing market even more. “The mid-range rent regulation is also a form of subsidy that ensures your housing costs are so attractive that you stay put. Then you get the same problem as in social housing, where it is fairly common for only 4 or 5 percent of homes to become available every year.”
According to Verwoerd, the Netherlands will soon face situations similar to Stockholm's, where there is a massive stock of regulated housing and an even bigger gap between renting and purchasing. “Because you have to take out a mortgage at market prices while you are still renting on a subsidized basis,” he said. “It also creates a big difference between rich and poor. People stay in a rental home for a long time and don’t build anything up.”
