RESIDENTIAL
Alignment with long-term strategy
Dutch rental homes are an essential part of institutional investors’ real estate portfolios. In addition to providing a solid return, investing in rental housing also contributes to important social challenges, such as affordable living and the energy transition.
Dutch rental properties offer an attractive risk-return ratio, with rental income that grows at least in line with inflation and long-term value appreciation well above inflation. Due to the ongoing growth in the number of households in the Netherlands (see Demographics & Well-being in the Megatrends chapter), demand from users remains guaranteed. This makes the risk low and fits well within the long-term strategy pursued by pension funds and insurers. The substantial housing construction task in the coming decades presents opportunities to expand portfolios.
Due to the increasing housing shortage, the housing market has received significant social attention and has risen high on the political agenda. This has resulted in rental regulation and fiscal measures that impact the investors’ market. With the stabilisation of interest rates, there has been some calm in the institutional investment market for rental homes, which has led to increased activity from institutional investors. This is despite the deteriorating investment climate, where, mainly due to fiscal measures, interest from foreign investors has declined sharply. International parties are much needed to realise the major tasks of new construction and sustainability in the Dutch housing market (see also the Investment Market chapter).
This chapter delves deeper into the main developments in the residential investment market and concludes with an investment outlook outlining the key points of attention for institutional investors in housing.
Hendric, Breda
OKU House, Amsterdam
Market dynamics
Scarcity as a driving force
DThe scarcity in the Dutch rental housing market remains persistently high. The housing shortage has been around 5 percent for many years now, and based on the building permits issued, it is unlikely that this shortage will be bridged in the short term. The government’s ambitions are significant: building at least 100,000 homes per year to reduce the deficit. For this, 21 large-scale residential construction locations have been selected where thousands of new homes must be built. This will also lead to new investment opportunities for institutional investors.
However, accelerating construction output is not straightforward. Innovations such as industrialised construction can speed up the building phase, but most delays occur in the planning phase, including obtaining necessary permits. The new cabinet will need to force a breakthrough to speed up objection and appeal procedures against residential development. Additionally, nitrogen issues and, increasingly, grid congestion restrict construction possibilities. Rapid development of infrastructure, including network facilities, is a crucial precondition for accelerating new-build production. Sufficient personnel is also essential. Research by the EIB shows that there will be a shortage of 75,000 workers in the construction sector in the coming years. The acceleration of housing construction therefore depends on many external factors. Even if the central government’s housing ambitions are successfully realised, the shortage will still stand at 3.5 percent in 2035, well above the 2 percent considered a healthy shortage. This structural scarcity ensures stable demand and keeps vacancy risk low for investors. It also provides a solid foundation for ongoing value development in the Dutch rental housing market.
[1] Source: EIB, Trends op de bouwarbeidsmarkt, 2025-2029
Rising demand for rental housing
For years, there has been strong demand for housing in the Netherlands, outstripping supply. This is evident across all price segments: long waiting lists for social housing, thousands of applications for mid-market rental projects, and sharply rising market-based rents and house prices. The triennial housing survey concludes that 14 percent of all house seekers prefer a home in the mid-rental or private rental sector, while nationally only 10 percent of the stock falls into this segment. In larger cities, the preference for renting is even higher at 17 percent. In practice, the high demand for affordable rental accommodation is confirmed, with thousands of interested parties for complexes with only a few dozen homes.
Despite high levels of new-build, the supply of rental homes has fallen as many former private rentals have been sold off and new construction has not sufficiently compensated for this. Vacancy rates in the private rental sector are now at a historic low and market rents are rising well above the long-term average. The scarcity and low vacancy are expected to persist in the coming years, given the current slow pace of new-build. Many private investors are also selling off their portfolios due to increased rental regulation and higher fiscal pressure, which only intensifies the shortage. As a result, market rents are expected to continue rising, with increases well above inflation. There is also scarcity in the owner-occupied market. House prices continue to rise, although the pace will slow in the coming years as affordability comes under pressure. The potential phasing out of mortgage interest relief will further temper price increases, but the politically proposed phase-out period of 10 to 30 years will spread the impact over many years, keeping the short-term effect relatively limited. Both the rental and owner-occupied markets are therefore expected to perform well in the coming years, with growth in vacant value and market rent well above inflation.
FIGURE 1: Development vacancy rates and market rental value growth (y-o-y)
Source: MSCI
We are living in smaller spaces
Despite the significant shortage of homes, the living space per resident in the Netherlands is relatively high. There are 2.1 rooms per inhabitant, well above the European average of 1.6 rooms. This places the Netherlands among the top European countries (source: Eurostat). On average, a Dutch home has a floor area of 120 m². This figure is decreasing, as homes in the Netherlands are becoming smaller due to various developments. Firstly, the average household size has dropped sharply in recent decades (from 2.8 in 1970 to 2.1 now). Over the coming decades, household size is expected to fall further to about 2.03 people per household. This allows for more compact housing. The focus on affordability also plays a major role. Rising building costs and house prices, as well as increased rental regulation, mean new rental homes, especially in major cities where space is limited, are increasingly small.
In response to smaller homes, shared facilities are used more often, such as outdoor spaces, meeting rooms or public functions on the ground floor. These facilities add value for various target groups and help reduce loneliness. Investing in smaller independent homes, such as studios of around 30 m² to two-bedroom flats of about 45 m², offers institutional investors opportunities to scale up. By using smaller floor areas and efficient layouts, many affordable homes can be added to the stock. This often also meets affordability requirements. There is especially strong market demand for this type of housing in larger cities, as shown in opportunity map 1.
FIGURE 2: Average floorspace per year of construction
Source: CBS
Gerbrandystraat, Utrecht
Justus, Amsterdam
Loyal to the home market
Pension funds and insurers are once again highly active in the market for investor rental homes, meaning Dutch institutional investors are actively contributing to solving the housing shortage. Reasons for renewed activity include the stabilisation of capital market rates, greater room for real estate in ALM, and clarity on rental regulation. Additionally, parties are keen to contribute to providing homes for their members and solving the housing shortage. This heightened interest is expected to continue in the coming years.
Between 2020 and 2024, the investment market was dominated by investors acquiring projects with a sell-off strategy. This was attractive due to the sharp fall in the vacant value ratio. As a result of higher risk-free rates, sharply increased house prices and rental price regulation, these have fallen to below 75 percent, whereas five years ago they were around 90 percent. Since early 2025, a clear turnaround is visible: vacant value ratios are slowly increasing again. This trend is expected to continue, partly because rents are rising faster than vacant values and transfer tax will be reduced in 2026. However, it is unlikely that vacant values will return to the levels of five years ago, as risk-free rates are not expected to fall sharply. Selling off remains an interesting strategy to slightly increase returns, although the declining turnover rate in the rental market means it takes longer to sell off a complex entirely.
While institutional investors are increasingly active in the Dutch market, foreign and private investors are largely absent. Due to the unfavourable fiscal investment climate in the Netherlands, many of these parties are even reducing their portfolios. The reduced activity of foreign and private investors leads to lower liquidity. Given the major challenges in housing construction and sustainability, it is essential, alongside Dutch institutional investors, to attract foreign investors back into the housing market.
FIGURE 3: Index housing values and market rents (2020=100)
Source: MSCI, CBS
Direct return takes the lead
The gap between risk-free rates and initial yields on residential investments has narrowed considerably in recent years. Although rental risk has also decreased significantly, there is little room for further reduction in the current risk premium versus risk-free rates. The limited risk premium also means that a sharp rise in interest rates could lead to new write-downs, but a scenario like the significant devaluations seen in 2022 seems unlikely. Risk-free rates are expected to remain stable in the coming years, so initial yields will remain at around the current level.
In addition, house price growth is expected to level off, so this will no longer drive value increases. The direct return from investor rental properties will therefore become increasingly important for portfolio performance. The quality of operation will increasingly determine the success of the investment portfolio. Factors such as minimising turnover vacancy, market rent harmonisation, good maintenance, attention to sustainability and robust administration are key to a successful portfolio. The rise of smart buildings and the increasing use of artificial intelligence in maintenance and property management can deliver further efficiency gains. Housing portfolios with these elements in good order thus form a strong foundation for stable and attractive returns.
FIGURE 4: Spread prime yields and risk free rate (10 year NL bonds)
Source: MSCI, Oxford Economics
Investment climate focus in housing policy
The increasing housing shortage in recent years has put housing construction and affordability high on the political agenda. While mid-market rent regulation has been present locally for about ten years, the introduction of the Affordable Rent Act in 2024 has also brought national regulation. Most major municipalities have now adapted their rental policy to the national legislation, preventing overlapping rules. This overlap is undesirable because stacking regulations, such as maximum indexation, further limits returns.
Recent new-build transactions show that mid-market projects, despite stricter regulation, are still financially viable if costs are minimised and margins are kept small. However, returns for investors are under pressure, as rental income in many cases does not outweigh rising construction costs. Even with the 10 percent new-build premium in the WWS, the business case remains challenging. For many larger projects, national subsidies such as the Startbouwimpuls fortunately provided a solution.
It is important that the feasibility of mid-market rent is central in future legislative evaluations, including the Affordable Rent Act. In addition to rent regulation, fiscal measures such as the abolition of the FBI status, the increase in transfer tax and the reform of Box 3 have had a major impact on the rental housing investment market. Although these measures do not always directly affect institutional investors, they make it unattractive for foreign and private investors to invest in Dutch rental properties. This has led to a sharp fall in market liquidity.
For both rent regulation and fiscal policy, stability is desirable for institutional investors. Pension funds and insurers have a long-term horizon; constantly changing the rules creates uncertainty. The forthcoming European legislation that will allow state aid for housing associations in the mid-market segment is therefore cause for concern. The Dutch implementation is not yet known but may disturb the level playing field between investors and associations. Housing associations may get more favourable financing conditions (about one percent lower interest) for developing mid-market rental housing. As institutional investors cannot or do not want to access this, it will further disrupt the housing market and institutional investor activity. This is unfortunate, as institutional investors’ investments are urgently needed to achieve housing construction targets.
Podium, Amsterdam
Investment outlook
Rental housing as an essential part of portfolios
Investor rental homes are an essential component of institutional real estate portfolios. The historical performance of this segment is very strong, with long-term total returns above 10 percent (over ten years). Due to consistently high market demand, risk is relatively low, rental income rises at least in line with inflation, and there are benefits from long-term house price growth. In addition, Dutch rental housing is particularly suitable for impact: investing in sustainable and affordable rental homes helps address social issues such as the energy transition and the housing shortage.
The most common way of categorising residential investments is by price segment, in line with national regulations in which social and mid-market rents are regulated. The differences in historical performance between social rent, mid-market rent and private sector rent have long been relatively minor. Social and mid-market rents perform better in periods of economic downturn and are therefore more stable, while the private sector benefits more from economic growth. For example, the private sector achieved lower total returns over the past five years due to rising vacancy rates during the pandemic around 2021.
FIGURE 5: Average total return per rental price class
Source: MSCI
The social segment, with monthly rents up to about €900, is traditionally the domain of housing associations. Institutional investors generally consider initial yields on regular homes too low to invest. Smaller youth or student homes are also often regulated, but can still yield interesting returns due to efficient layouts. Such concepts are particularly promising in opportunity map 1 and larger student cities.
The mid-market segment remains attractive. With its large target group, risk in this segment is very low and it fits well with the social ambitions of institutional investors. Limited opportunities for rent increases above inflation and restrictions on selling off lead to lower long-term returns than in the private sector. However, historical performance in the MSCI index shows that mid-market rental homes have slightly higher long-term total returns than social and private sector rentals.
For private sector homes (above the mid-market threshold of about €1,200), there are no restrictions on the initial rent. On turnover, there are opportunities to raise rents to market levels. Apart from the current low turnover rates among sitting tenants, higher rent levels do come with higher rental risk, depending partly on market conditions. In the recent past, during COVID, the higher rental segment experienced increasing vacancy rates. Although there are currently no indications of a recession, the higher rental segment remains more sensitive to economic fluctuations than the mid-market. Historically, private sector long-term total returns are even lower than for the mid-market.
We expect that for this outlook period (2026-2028) the private segment will perform best, as it benefits most from rising market rents and vacant values. Over the longer term, however, the private sector will continue to carry a slightly higher vacancy risk, particularly in periods of economic downturn. For most institutional investors, a mix of rental segments is key to a balanced portfolio. For stable long-term returns, a greater allocation to mid-market rents may be chosen, while private sector rentals suit a strategy geared towards potentially higher returns. Social rent also has a low risk but often yields lower returns than institutional investments require.
Diversity in housing types
In addition to price segments, homes can be categorised into various types. While all subsegments of investor rental housing benefit from high market demand and generally strong historical performance, there are a number of points for institutional investors to consider.
There is strong user demand for both flats and family houses. The return on both types follows a similar trend; historically, family houses have performed slightly better. With over three-quarters of total value, institutional investors primarily invest in flats, and new-build supply is often flats as well. However, family houses are also an important part of portfolios and have a strong historical performance (source: MSCI).
It is expected that the good performance of family houses will continue in the coming years. Due to their large floor area, family houses are not affected by the Affordable Rent Act, making it possible to ask market rents that are expected to rise rapidly in the coming years. As a result, family houses will also continue to see higher value growth than flats. A mildly dampening factor is the low turnover rate in this segment, which means that rents are updated to market rates more slowly.
Kernhem, Ede
Currently, households strongly prefer family houses, but this preference is expected to decrease slightly in favour of multi-family homes, both for rent and purchase (WoON, 2024). In the future, this preference will depend heavily on the region. In large parts of the country, the number of families is still rising, albeit at a slower pace than the number of households. Especially outside the Randstad, demographic forecasts predict a decline in the number of families, which will reduce future demand for family houses. It is therefore advisable to be cautious about investing in large concentrations of family houses in these regions.
FIGURE 6: Forecasted growth families 2045 vs. 2025 per region
Source: ABF
In addition to regular homes for a broad target group, adding homes for specific groups can add value to portfolios. Think of homes for young people and students in university cities (see frame) or life-course-proof homes, meeting the large market demand. Life-course-proof homes can also encourage mobility, as every such home leads to an average of about three moves. Shared living (friends’ homes), where two young adults share a living room and kitchen, offers possibilities for affordable living.
For both younger and older target groups, these specific characteristics require extra attention in letting and management. For example, higher turnover rates and, especially for older tenants, additional attention in letting and marketing.
Student housing: high potential
The student housing market has become increasingly attractive to real estate investors in recent years, both in the Netherlands and in the rest of Europe. According to research by INREV, student housing is now the third most popular investment sector, with 67 percent of respondents preferring this sector, a significant increase from the five-year average of 35 percent. The combination of stable demand, attractive historical returns and relatively low vacancy makes student accommodation an interesting investment category within the property market.
Especially international investors have invested heavily in student housing over the past ten years. But Dutch institutional investors can also play a key role in investing in student accommodation. In total, 60,000 additional student homes need to be built in the coming years to bridge shortages. This is about 5 percent of the total number of (home-based and non-home-based) students in the Netherlands.
The investment potential of student housing in the Netherlands is also large due to the high quality of education and the favourable business climate. The Netherlands is known for its excellent universities and colleges, which are well positioned both nationally and internationally. This attracts a large number of (international) students every year. This strengthens demand for accommodation in student cities.
The success of investments in this sector depends on a balanced mix of self-contained studios and non-self-contained rooms. Self-contained living spaces offer stable letting and low vacancy, with the planned expansion of housing benefit from 2026 further boosting demand among lower incomes. Non-self-contained rooms, such as friends-style concepts, are cheaper to develop and generate lower rental income per m², but support affordability, social interaction and diversity in supply. Short stay can also be used for international students, but comes with higher vacancy risks. Crucially, lettability strongly depends on the level of service and additional facilities.
Financially, student housing remains attractive: the risk premium compared to prime residential property is about 90 basis points, while total returns are comparable to residential property but with lower volatility. As the sector matures, the spread compared to regular housing is expected to narrow further.
Yours, Leiden
Opportunity map shows strong demand
DeCurrently, the high demand for homes is visible in almost all of the Netherlands. Due to demographic developments, demand for rental housing will decrease in a small part of the country in the coming decades. The opportunity map assesses the attractiveness of the market for investor rental homes for each municipality, resulting in all Dutch municipalities being divided into seven categories; the lower the category, the more attractive the market. The most attractive municipalities are in the area roughly comprising the Randstad, the Brabant urban corridor and large parts of Gelderland and Overijssel.
Particularly in categories 1 to 3, there are many investment opportunities across almost all price segments. In categories 4 and 5, these are more dependent on the product and location, with less scope for private sector homes well above the mid-market rent threshold. In smaller municipalities, absolute demand for rental housing is low, so there is only room for small-scale housing complexes. In the coming decades, the population in parts of the country will also age, which will locally reduce housing demand in the long term, especially in categories 6 and 7. Nevertheless, there is still demand for life-course-proof rental housing for the elderly (see also the Healthcare Outlook).
The biggest change in the latest edition of the opportunity map is the addition of Eindhoven in opportunity map 1, which further consists of the four major cities in the Randstad. Owing to strong economic development, the presence of knowledge and technology companies and increased housing demand, the region is becoming increasingly attractive to both residents and investors. A key driver of growth is the high-tech industry. The planned expansion of ASML in this region is expected to further increase demand for rental housing. The number of knowledge migrants is also rising as a result. After Amstelveen, Eindhoven is the municipality with the highest number of non-EU labour migrants per resident. These are generally highly skilled migrants who often choose to rent.
The opportunity map also aligns with national spatial policy, which was updated in 2025 with the Nieuwe Nota Ruimte (spatial plans for the Netherlands). In addition to the 17 NOVEX locations, four additional large-scale residential construction locations were presented in 2025, each of which must deliver at least 3,500 homes. In total, the government has planned 300,000 homes at these 21 locations, to be built over the next ten years. There are also various small-scale new-build locations, mainly in and around cities. The 21 large-scale residential construction locations almost all fall into opportunity map categories 1 to 3. As a result, there will likely be more investment opportunities in these regions in the future. To ensure that enough affordable homes are realised in this new-build, at least 70 percent of all new homes must be affordable rent or purchase, according to the Housing Policy Strengthening Bill. Institutional investors can play a key role in realising the government’s new-build plans. By getting involved early as investors, they can help accelerate area developments.
FIGURE 7: Opportunity map with large scale housing construction locations
Sustainability as a strategic principle
The Dutch housing stock has become much more sustainable in recent years. Institutional investors have taken the lead by continuing to invest in new-build homes that often exceed the legal minimum requirements of the Building Decree. The focus is not only on the energy efficiency of homes, but also on the emissions released during production, transport, processing and application of construction materials. Building materials account for 13% of global CO₂ emissions and the sector is responsible for about 50% of raw material consumption (source: UNEP).
Sustainable homes form the backbone of future-proof portfolios, where sustainability is not just a precondition but the strategic principle. For new-build, the focus is on biobased materials and circularity, to structurally reduce CO₂ emissions. Climate change also demands extra attention for heat stress and water retention. Investments in sunshading and green spaces are not only functional, but also enhance the liveability of urban areas.
Existing residential portfolios also require attention for sustainability. By making them more sustainable rather than selling, investors actively contribute to the energy transition. The Netherlands still has around 850,000 rental homes with energy label D or lower, half of which are owned by market parties. Here lies a direct opportunity to make an impact. Sustainability is not only good for the climate, but also for tenants. Lower energy costs mean lower total housing costs, improving affordability. At the same time, increasing regulation means sustainability is becoming more important for the value retention of real estate. Energy performance and climate adaptation will increasingly influence the value development of residential investments. We are increasingly seeing evidence of this in our portfolios. This is most clearly visible in vacant values: making a home more sustainable from label D to A+ or better leads to an 11 percent value increase (source: Brainbay).
In 2024, a study commissioned by Achmea Real Estate examined the impact of sustainability on value. It found that, over the long term, sustainable homes outperform those that are not upgraded. This is supported by data on investor rental properties, with sustainable homes generating higher total returns than non-sustainable homes (source: MSCI). In addition, sustainability reduces the risk of future regulation, such as the forthcoming CO₂ tax on gas use in ETS2. Investing in sustainability therefore not only benefits the climate, but also ensures homes remain attractive to both tenants and investors.
33Bovengronds, Delft
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