In the Netherlands we now have been in a half or intelligent lockdown for more than 5 weeks. In that short period, the rental market has come more or less to a standstill; properties are only being rented out sparsely, but questions are asked all the more. We are approached by landlords of properties, but also by buyers and sellers, about how we see the situation.
Like everyone else, we cannot predict the future. However, after 5 weeks in this situation, we now think that we can reasonably estimate the contours and consequences of the current situation for the rental market.
Of course, everything depends on the duration of this crisis and how the economy will subsequently develop. Although we realize that our vision may already be outdated tomorrow, we still try to inform you about our experiences, our ideas and our view.
There are currently much more homes for rent
From the moment that Dutch Prime Minister Marc Rutte announced the measures on March 15, requests for rental housing have largely come to a standstill. Scheduled viewings were cancelled and often not (yet) rescheduled. Only a few requested a viewing.
Since last week, we have seen the number of applications, especially by the Dutch, picking up again slightly. But especially for the more affordable homes (Amsterdam < € 1,300.00 per month). The more expensive homes still attract little to no candidates. And most expats do not act at this moment.
Meanwhile, it is noticeable that the range of rental properties on rental websites such as www.pararius.nl is growing steadily. Normally, the listed rental properties in Amsterdam on Pararius averages around 1850 homes, now it is around 2400 homes. That is about 30% more!
We believe this can be explained in 2 ways; it takes longer for houses to be rented and tourism has almost completely stopped. Landlords in Amsterdam who normally rented out their properties to tourists via websites like AirBnB, now offer their properties for long-term rental. As a result, a larger number of listed rental properties and therefore more competition.
Consequences for the rental market if this crisis lasts for a longer time
We now mainly see a very cautious attitude among many seekers; people are clearly uncertain about the consequences of this situation. "Will I still have a job? Will my study start again soon? "We see this mainly with expats and foreign students.
If the Corona virus, and thus the restrictive measures for the economy and the uncertainty for people, remain active for a long time, the economy will be irreversibly damaged. Many people will lose their jobs or lose income. Various economists are very clear about this.
If you aim for a Dutch tenant, it could still be pretty okay. In the future, if the economic situation worsens, most Dutch will probably not want to / cannot buy and are forced to rent. A lesser buying market is therefore certainly good for the rental market. We have clearly seen this in the previous crisis. But uncertainty about job and income will have consequences for the level of rental prices. Moreover, a Dutch person, unlike an expat tenant, is less willing or able to pay high rents. After all, they do not have the great tax advantage that an expat does.
If you are aiming for an expat tenant, the situation is different. If the Corona crisis lasts longer, the economy suffers major damage and is struggling to reboot, expats can lose their jobs and leave. They may even want to get out of a current lease prematurely.
But if the economy is seriously damaged, then far fewer expats will come to the Netherlands. For example, one of the largest expat companies in Amsterdam, travel platform Booking.com, has already applied for support from the state. In one month from a billions turnover to an application for support! It is inevitable that they will have to fire expats. And with Booking.com, many other companies have run into problems.
If there are fewer expats this will, especially in expat-cities, have a price-depressing effect. After all: more supply (see above) and less demand.
Let's hope it's all over soon. We ourselves think that if the economy starts up again in phases within a few weeks, it will all be easier. If it takes longer, we are guaranteed to notice it all.
What if you have vacancy?
If you now have vacancy, you can do a number of things:
1. You can offer a prospective tenant a temporary discount for, for example, the 1st 2 months if they want to conclude a lease for at least 1 year. We have already noticed that candidates are trying to negotiate the rental price much more than usual and are mostly not prepared to pay the asking price.
2. You can also offer your home for a shorter period than 1 year, for example for a minimum of 3 months. That can win over candidates who are unsure about their job security. If we rent out your home through this construction, we are prepared to charge the fee pro rata per month. So that you are not at risk.
3. You lower the rent. If your asking price is above marketprices anyway, we advise you to think about this. With more listings and less demand, you are unlikely to get your original asking price.
What if your current tenant threatens to leave?
If your current tenant threatens to leave because he / she can / will no longer pay the rent, we would also recommend that you consider the above. Keeping your foot down and letting the tenant leave could mean that your home will be vacant for a period. Especially if you stick to the original rental price when looking for a new tenant. Then you can better accommodate your current tenant by temporarily granting a discount.
Buy a property now for buy-to-let?
We have recently been approached by various people to take a look at the rental options for a property that is yet to be purchased.
First, in the current situation it is very difficult to provide accurate rental price advice. However, although we are not active in the buying market, we, like various experts, believe that the buying market will be hit if the Corona virus stays with us for a longer period of time.
Currently, many sellers decide to accelerate the selling of their properties. So there will be more listings. However, the reports now in the media still speak of price increases. But it is thought that this is because people with a mortgage-offer in their pocket still want to benefit from the lowest possible interest rate. And people who are now losing income may be less likely to get a mortgage next year. Not to mention the fact that banks are likely to become more critical when granting a mortgage. So for many people it is NOW-OR-NEVER: "Better now pay too much, but for a low interest rate and then I know for sure that I have a house."
We therefore expect the prices of houses to fall within a few months. But due to the unchanged housing shortage, we also expect it to be temporary. So, please take a wise decision if you are thinking about buying property for buy-to-let. Certainly also because it is not entirely clear how rental prices will develop. We believe there will be bargains while the prices now are still on top!
We realize that this is not a positive story. But we have tried to paint a realistic picture of our findings and what can happen in these uncertain times. Let's hope it turns out to be a disaster scenario and that we can get back to normal soon.
Photo by Martin Sanchez on Unsplash