According to the latest 'Market in Minutes' report from international real estate advisor Savills, the total Dutch investment volume for the first three quarters of 2022 reached approximately €11.4 billion - a decrease of approximately 5% compared to the same period last year. Due to a number of large transactions, the investment volume for offices more than doubled in the third quarter of the year compared to the previous quarter.

Despite the current sentiment, the number of transactions in the first three quarters of 2022 is significantly higher than in the first three quarters of 2021 (+23%), boosted by strong H1 figures. In the current market conditions, most interest remains focused on high-quality real estate in prime locations. Investors who are less dependent on borrowed capital are also still generating investment activity.

However, reduced investment activity is particularly visible in the residential investment market in the Netherlands, given increasing regulation of the housing market. Some initial changes have been announced by the Dutch government, but the measures are still not final. This uncertainty and the current investment climate are causing residential investors to be more cautious and many new construction projects are being reconsidered.

In addition, with the aim of improving the position of first-time homebuyers, the general transfer tax rate will increase from 1 January 2023 from 8% to 10.4%. The Dutch rate was already quite high prior to the increase compared to several countries in Europe with, for example, the Czech government completely abolishing the transfer tax (previously 4%) in 2020.

Table: Real estate transfer tax rates in a selected number of European countries

Source: PwC, DLA Piper, Savills Data, Intelligence & Strategy

Bas Wilberts, Head of Residential & Hotel Investment at Savills in the Netherlands, comments: “The tax increase comes at a time when investors are facing higher lending costs due to extreme inflation, rising interest rates and a reduced economic outlook. In the very short term, the increase may provide an incentive to complete intended investment transactions by the end of 2022.”

Investor sentiment is under pressure due to changing market conditions, says Savills. Many investors are therefore more selective and risk averse. The frequency of, and gaps in, different price expectations are increasing, making it more difficult to reach an agreement. Revaluations are inevitable to bring buyers and sellers back together.

Wilberts continues: “For the Dutch residential investment market, we expect that a price adjustment of 15% to 20% will be necessary to achieve a new equilibrium.”

Jan de Quay, Head of Investment at Savills in the Netherlands, adds: “The office investment market is also still looking for a balance. In the logistics market, sellers are already adjusting to higher return expectations. This is primarily because returns in the logistics market have fallen sharply in a relatively short period of time. This increases the acceptance of lower prices: buyers from a few years ago can still sell at a profit. In addition, many sellers are developers, which means that a margin remains, even with a higher return.”

Table: Prime BAR Dutch real estate largely up

*High-street retail at top locations in Amsterdam

Read the full report here.