It was one of the most pressing questions regarding the tense housing market of recent years: how do you ensure that first-time buyers can buy a house again? Research of the Erasmus University in Rotterdam, the University of Amsterdam and the Kadaster, about which it Financial Daily published on Monday, provides some clarity on that. One of the policy measures that has been introduced, excluding investors from the owner-occupied market, seems to be working. At least, partly.
In 2022, the year that the Purchase Protection Act took effect, first-time buyers bought a home more often than before – and investors less often. The research focuses mainly on Rotterdam, where protection was introduced in sixteen districts. Home lessors in those neighborhoods bought 23 percentage points fewer homes than one year previously. First-time buyers bought 14 percentage points more homes in 2022.
The percentages are lower for the rest of the Netherlands, presumably because this problem is most pronounced in the major cities. Many starters want to live there, investors saw the best opportunities for a good return and that is where the greatest shortages exist. Nationally, investors bought about 10 percentage points less homes in 2022 and first-time buyers 4.4 percent – two thousand physical homes – more.
There is, however, a downside. After the introduction of the law, fewer houses came on the rental market, which made it more difficult for those looking for rental housing. According to Lianne Hans, who participated in the investigation on behalf of Kadaster, this mainly has consequences for home seekers with lower and middle incomes. More often than people with a high income, they depend on rented accommodation in the private sector.
“Thanks to this measure, the middle class is better able to buy a home, because now there is more supply,” says Professor Marc Francke of the University of Amsterdam, who co-wrote the study. “But for those who earn too little to buy a house, or who cannot go to the social rental sector, for whatever reason, this is not positive.”
Social rent: wait seven years
The average waiting time for social rental homes is currently seven years, according to the umbrella organization housing corporations Aedes. This pushes many home seekers who actually claim social housing into the free sector. Residential investors have been criticizing for some time that rules to keep investors out of the housing market ultimately lead to fewer rental properties.
Since January 2022, the Purchase Protection Act has given municipalities the power to refuse investors up to a certain home value on the market. The idea was that investors bought some of the already scarce homes to rent out at a high price – resulting in tightness and high prices, both on the owner-occupied and rental markets. In 2021, investors bought about 19,000 homes from owners who had previously lived in the house themselves. Small investors, with one to four rental properties, bought most of these properties: about 15,000.
The other side of the law is that fewer homes have come onto the rental market since its introduction
Under the law, a purchased house must be occupied by the buyer for the first few years after the transfer. Several cities, including the four largest, implemented the scheme.
Municipalities themselves determine the limit to which investors are not welcome. Rotterdam and The Hague imposed that limit on homes of 355,000 euros. In 2022, this was also the amount for which buyers could obtain mortgage protection under the National Mortgage Guarantee. Utrecht and Amsterdam decided on a wider limit and excluded investors from the 60 percent cheapest homes in their municipality. In Utrecht that amounted to houses up to 440,000 euros at the time, in Amsterdam up to 512,000 euros.
The core of the study was the Rotterdam case. The municipality did not introduce purchase protection for the entire city, but for 16 of the 71 districts. Investors and first-time buyers, according to research published earlier by economists magazine ESBoften buy in the same neighborhoods.
“Rotterdam was a good case study, precisely because protection was introduced there in some districts and not in some districts,” says Kadaster researcher Hans. This is important because other factors can also influence the market, such as the step-by-step increase in transfer tax from 2 to 10.4 percent for landlords. In Rotterdam, the researchers compared neighborhoods with and without anti-buying protection, in both 2021 and 2022.
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It is also striking that this comparison showed that first-time buyers paid about the same amount for homes as investors, says Professor Francke. “The story often goes that the investor has pushed the starter out of the housing market, and that this has pushed up prices,” he says. “We are not finding any evidence for the latter at the moment.” Investors can still benefit from buying a home. For example, because they can deposit the amount in one go.
Point system
The Purchase Protection Act coincides with a series of other measures intended to keep investors away from the housing market. Various tax measures, such as the increased transfer tax, should also lead to this. Just like the points system that the cabinet wants to introduce from next year to regulate rental properties in the middle segment: houses with rents between roughly 800 and 1,100 euros per month.
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Investors and their sector organizations are critical of the measures. According to them, the number of affordable rental homes will only decrease as a result of these measures, because the rent would no longer yield enough.
This study does not yet provide evidence for this, says researcher Hans, because only one measure has been examined. “But we do see in another study that more investors are selling their homes since the regulation of the middle rent was announced last year,” says Hans. That changed in the fourth quarter of 2022 about 7 percent of investment homes. “They sell them to buyers who will also occupy the house, not to other landlords.”
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