The Effect of the Dutch Coalition Agreement on Real Estate Investors

December 21, 2021

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On December 15, 2021, party leaders Rutte (VVD), Kaag (D66), Hoekstra (CDA), and Segers (CU) presented the coalition agreement “Looking after each other, looking ahead to the future”. This coalition agreement has also some unpleasant consequences for Dutch real estate investors. But what are those consequences? Can those real estate investors somehow circumvent these upcoming real estate laws?

Self-occupancy obligation

As of January 1, 2022, Dutch municipalities in the Netherlands will be able to ban real estate investors from investing in cheap to mid-prices housing in certain neighbourhoods in order to alleviate the strain on the Dutch housing market. The Dutch government hopes this way to ensure the availability of affordable housing in Dutch cities. 

With housing prices soaring across the country, the average earner is finding it tougher to buy a property in the Netherlands. As the situation continues to worsen, the Dutch government has decided to take action. As of next year, a new law will mean municipalities will have the power to ban buy-to-let properties in certain areas in cities, stopping real estate investors from purchasing affordable housing purely with the aim to rent it out. Some municipalities will ordain that one must live at least two years in the purchased property, but other municipalities are thinking about at least three years. Hence, this new real estate law will make it impossible for real estate investors to buy properties and rent them out to other people. 

The biggest cities in the Netherlands were all pleased to hear about the real estate law change, whereas certain municipalities such as Almere, Breda, Eindhoven, and Nijmegen have said they will investigate the extent of the issue in their cities to determine whether and where such a ban is necessary. Amsterdam is looking to ensure that as many properties as possible fall under the new so-called purchase protection. 

Abolition of gift exemption for owner-occupied properties

The one-off high gift exemption of €105,302 (2021) applies to the acquisition, improvement or maintenance of an owner-occupied home and repayment of home acquisition debt for recipients aged 18 to 40 years. The coalition agreement states that the extended gift exemption for owner-occupied homes will be canceled as of 2024. One would still have two years to make use of this gift exemption.

Increase of transfer tax

In previous years, the transfer tax for real estate investors buying properties was 2%. The Dutch governments wanted to slow down real estate investors by increasing the transfer tax to 8% this year. However, this does not have any effect on real estate investors; they just continue to buy properties. Therefore, the Dutch government will increase it again to 9% starting 2023. So, in previous years, if a real estate investor bought a house for €300,000, the investor would have paid a €6,000 tax. From 2023, this same real estate would pay €27,000. In other words, this real estate investor pays approximately five times more than before.

What will real estate investors do?

As a result of all these restrictions, it will be more difficult for real estate investors to buy rentals. Of course, many real estate investors will quickly buy a property before 2022, or have already bought a property or several. But, what will these real estate investors do in 2022?

Real estate investors are going to look for other real estate investing options. Nowadays, for example, certain companies offer courses to learn about real estate investing in the United Kingdom, Germany, and Belgium. So, there is a real chance that many Dutch real estate investors will move to our neighbouring countries, England, and possibly other (European) countries. By the way, these countries are much more flexible in terms of regulation. Therefore, there are already many Dutch real estate investors in such countries.

However, not all these real estate investors will move to other countries. Many other real estate investors will still invest in the Netherlands, but they will look for neighbourhoods where the purchase ban does not apply.

This article is written by Moesen Tajik

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