2023-10-11 13:46:14
Not bad, said Minister Hugo de Jonge (public housing) regarding the report that the Swedish real estate company Heimstaden wants to sell 2,500 of its Dutch rental properties. Investors have recently bought up many ‘affordable homes’ and marketed them as ‘overpriced rental properties’, the minister noted. So now rental properties are going to the owner-occupied market, and according to him that can’t hurt.
De Jonge’s comment indicates a change. Less than ten years ago, VVD member Stef Blok, then minister for housing, traveled to real estate fairs from Munich to Singapore to point out to investors that good money might be made in the Netherlands. According to him, the demand for rental properties was high. “We have eliminated many regulations and created opportunities to increase rents more,” he said. Invest your capital in the Netherlands, was Blok’s message, return guaranteed.
Foreign investors saw the ‘good opportunities‘ regarding which Blok spoke. It started with the German Patrizia and the British Round Hill Capital, both of which bought thousands of homes from corporations in need. The two quickly sold that asset, fueling critics’ fears that such investors are a kind of ‘locusts’, eager for quick profits.
The fact that the American Blackstone turned out not to pay taxes in the Netherlands thanks to clever tax structures did not benefit the reputation of these types of real estate companies.
Gifts for investors
However, the arrival of foreign investors has provided something for home seekers. Because to avert the housing crisis, new homes are needed in any case, explains emeritus professor of housing market Johan Conijn. And new construction requires more capital than is available in the Netherlands.
In itself it was not surprising that Minister Blok wanted to attract foreign capital, even if it is only partially invested in new construction. “It is mainly the gifts with which he wanted to attract investors to the Netherlands that we now regret,” says Conijn. “Such as the introduction of temporary contracts and the rent increases that he made possible. These have led to excesses.”
But the tide is turning. Foreign real estate companies now own around 14 billion euros worth of Dutch rental properties. But Heimstaden, one of the larger homes with 13,000 homes, wants to get rid of 2,500 homes. Just before the summer, the Canadian real estate investor Eres had also announced that it would put 6,900 Dutch rental properties for sale. What is going on?
Sentiment has turned
Heimstaden is clear regarding it: it is due to the ‘hostile climate’ in the Netherlands. “When we purchased our first homes here in 2018, we were welcomed with open arms,” says spokesperson Edward Touw. “But that sentiment has completely changed. Nowadays policy is made from the gut. This policy creates risks for real estate parties.”
This hostility is evident, among other things, from the transfer tax that investors have to pay when they buy a home: it has been increased to more than 10 percent, five times as much as a few years ago. Heimstaden is even more irritated by De Jonge’s bill to ban excessively high rents in the private sector – which reduces returns for investors. Whether that law will pass in the House of Representatives is not certain, but the risk alone deters the Swedish company.
You see, that law is harmful, real estate lobbyists shouted immediately following Heimstaden’s announcement. But there is another reason to sell homes, the Swedish company admits. Much of his property was purchased with borrowed money. Part of that debt must be paid off within the foreseeable future, with newly borrowed money. But those old loans were outstanding at the low interest rate at the time, but the new ones have to pay the significantly increased interest rate. And so Heimstaden needs money.
A ‘healthy choice’, spokesperson Touw calls it, “there is no need for money”. But in these circumstances, Heimstaden carefully investigates in which countries it makes the most sense to sell homes. “And the political risks in a country play an important role in that choice.”
‘The resistance is provincial’
Is Heimstaden’s departure indeed ‘not a big deal’? Conijn has his reservations. “De Jonge sometimes seems to think that he can do without foreign investors like a toothache. But he will still have a toothache if they really stop investing in the Netherlands. This resistance to foreign investors is a bit provincial in any case.”
At the same time, Conijn expects that the ‘hostile climate’ will not be too bad for investors. De Jonge wants to tackle excessively high rents, yes. But as long as he ensures that a return can still be achieved on rental properties, this should not deter investors. “But it is very unclear exactly how the bill will work out. And lack of clarity is something that real estate investors are allergic to.”
The direct consequences of mass sales are manageable. Eres wants to sell all his homes at once to another real estate company, which tenants will hardly notice. Heimstaden is looking for a separate buyer for each of those 2,500 homes, who will probably also live there. “So slightly more owner-occupied and slightly fewer rental properties are coming onto the market. No, that’s not a problem,” says Conijn. “There is a shortage of both.”
Hardly any new construction
Heimstaden has a total of 149,948 homes in ten countries. In 2018 it bought its first Dutch homes, a year later it made a big move by purchasing 9,544 homes for 1.4 billion euros from the British investor Round Hill Capital.
Like most foreign investors, Heimstaden only buys from other real estate companies and housing associations. 69 percent of the Dutch investor’s property consists of social rental properties, the rest is in the private sector. Converting social rent to the private sector, with higher rents, has only been done on a small scale by Heimstaden, says Touw.
Heimstaden hardly does any new construction. 168 apartments will soon be delivered in Breda, and that will be the case for the time being. “There were still a few thousand new-build homes in the pipeline,” says Touw. “But due to the new rental rules that Minister De Jonge wants to introduce – and yes, also because of the high interest rates on the capital market and the increased construction costs – that flow has dried up.”
Also read:
Landlords are threatening, but there is still no wave of sales of rental properties
A new law will force us to sell our rental homes, small housing investors have been warning for some time. But there is little evidence of this yet, and the House of Representatives will simply deal with that bill.
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