Savills News

Dutch residential construction market starting to stall, despite sufficient capital

According to the research report 'Spotlight Residential: The residential paradox’ by international real estate advisor Savills, there is no suitable solution in sight to tackle the Dutch housing market shortage. The current supply pipeline of new development projects cannot keep up with the strong demand and scarcity of (affordable) homes. Although investors and developers have sufficient capital available, construction projects have become increasingly unprofitable due to high construction costs and land prices, combined with further cost-increasing government regulations.


Significant regional differences

The current housing shortfall is 294,000 dwellings (3.8% of the Dutch housing stock). When expected new-build is subtracted from future demand, there will still be a shortage of 200,000 homes by 2030 (2.4% of the total housing stock). In the regions where housing shortage is rising the fastest, new construction projects have increasingly become unfeasible. The ‘Savills attractiveness scan’ shows the areas in which residential developments are relatively least financially profitable and the areas in which investors would like to invest. The scan takes into account the relationship between construction costs, material costs, land prices, additional development costs and sales prices. It illustrates that both Brabant and the Randstad have the highest housing shortage but are also the least feasible for new construction projects. However, due to existing market demand, these areas are particularly attractive for residential new build investors; a huge paradox.


Bas Wilberts, Head of Alternative Investment at Savills in the Netherlands, says: “The mis-match between supply and demand results in higher pressure on the Dutch housing market, leading to rising rents and sales prices. On one hand this is a problematic situation for the Dutch housing market, on the other hand it offers opportunities for investors. In the past, (foreign) investors were mainly interested in large residential portfolios. Currently, Dutch portfolios of various types and sizes are being traded for increasingly sharp, and ever compressing, prime initial yields. Especially now that the housing market is facing an enormous challenge, I expect that the housing shortage will not be resolved in the short-term. This will be reflected in record high prices of new-build dwellings that do come to the market.”

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