Capital Value: mid-rental investment requires…

According to Capital Value, by using different methods to determine the annual indexation of rents, it becomes impossible for tenants, landlords, investors and appraisers to predict the permitted statutory increase in the longer term.

In addition, many new construction projects also have local rules regarding mid-range rental properties. For more investments in new construction, the housing investor believes it is necessary to have clarity in the indexation of rental prices. This could be done by indexing the WWS table in such a way that the annual indexation of rents according to the ‘Nijboer Act’ remains possible. Capital Value: ‘The indexation of the WWS with CPI +1% is essential for investments in new mid-range rental properties’.

Nijboer Act extended

According to the specialist in residential investments, the ‘Affordable Rent’ bill does not make any adjustments to the annual indexation of the home valuation system, which means that indexation based on inflation is retained. The ‘Nijboer Act’, which was ratified by the Senate on April 23 until May 1, 2029, prescribes that the maximum rent increase is the lowest percentage of inflation +1% or collective labor agreement +1%. This creates a difference in the indexation of the housing valuation system and the rental prices of existing tenants.

‘The annual rent increase ensures that the rent is higher than the maximum reasonable rent according to the housing valuation system. The rent may then be too high according to the legislation, while the landlord does follow the legislation when making the annual rental price adjustment. This will cause problems with the appraisal and valuation of existing complexes and new construction projects,” says Capital Value.

Gap between index rent and reasonable rent

According to the housing investor, the graph with both indexation methods for an example home of 150 points (see the image) shows that when renting based on WWS points, a gap arises between the indexed rental price and the maximum reasonable rent based on the WWS. In addition, indexation cannot take place according to the Nijboer Act when a home is close to the medium rental limit (186 points), because the rental limit is only indexed with CPI. ‘This makes it even more complex for investors to invest in new construction within the current market conditions.’

Thijs Konijnendijk, head of Research at Capital Value: “To reduce the housing shortage in the coming years and to protect tenants in the housing market from excessive rents due to scarcity, more homes simply have to be built. This is only possible by offering investors clarity in the long term. It is therefore essential to increase the annual adjustment of the home valuation system to CPI +1% in the current bill. Other measures that can boost investments in new construction include a reduction in transfer tax and extending the duration of the new construction surcharge.”

New construction storage

The bill proposes a new construction surcharge of 10% that applies to projects for which construction starts before January 1, 2026. Because figures show that the new construction of affordable rental homes is lagging behind the ambitions and because many homes are sold off, this temporary period is still 1. Capital Value believes that 5 years is insufficient.

Separately from the discussion surrounding box 3 investments, the company believes that clarity must be provided quickly about the necessary reduction in the transfer tax, which has been increased to 10.4% in recent years. “The current limitation on interest deductions must also be reconsidered.”

Declining new construction production

Previous figures from Capital Value show that shortages in the housing market are increasing and sales of new rental properties are stalling. In the first quarter of 2024, only 1,260 new-build rental homes were sold, while at least 30,000 new-build rental homes must be built annually.

In addition, the number of building permits issued remains well behind the objectives for the coming years. In January and February, 8,113 building permits were issued. According to Capital Value estimates, the number of permits without incentive measures will not exceed 54,000 permits in 2024, while at least 80,000 permits are needed annually.