“Government plans for new construction in Amsterdam counter-productive”

City risks losing momentum for tackling shortage of mid-market rental properties

The Dutch government’s plans for new construction in Amsterdam, focusing on more affordable and sustainable homes, could actually increase the housing shortage, raise rents and result in less focus on sustainability in new construction projects. This is the conclusion of a study conducted by real estate advisor CBRE.

One of the key issues is the amount of construction planned, which is insufficient to meet predicted demand. In addition, strict regulation of the mid-market segment will reduce the investment value for investors. As a result, the city risks missing out on an opportunity to tackle the housing shortage since long-term investors are specifically in search of investment opportunities in the mid-market rented housing sector.

Increased housing production needed

According to the Primos forecast, at least 8,660 new homes will be required to reduce the housing shortage in Amsterdam. However, the annual housing production proposed is just 7,500. This shortfall will result in further price increases in the free market sector.

Amsterdam less attractive for investors

In addition, the restrictions imposed in the new regulations are reducing the investment value of housing projects, according to calculations by CBRE*. Assuming land values remain the same, investors are being forced to accept lower returns in order to guarantee the financial feasibility of the project. This may result in investors shifting to other municipalities where they can achieve the return on projects that they demand.

This, combined with increasing construction costs and high land prices, could cause developers to opt for a different building function (e.g. office accommodation) or even other cities, possibly abroad. This will delay production of mid-market rented housing, increasing the shortage and putting the affordability of housing under further pressure.

Sustainability of new construction under pressure

The low investment value can also have consequences for the quality of new construction.

Developers have less room to invest in the quality of homes because of the lower investment value, which forces them to make hard choices. That could mean a smaller balcony or none at all, more modest kitchens or choices affecting the whole level of finishing for a housing complex. There will also be less opportunity for additional sustainability aspects. This is a particularly bad development at this time.
Robbert Arkenbout, Associate Director Residential Capital Markets CBRE
Alexander Buijs, Director Capital Markets
There is currently momentum for working to resolve the housing shortage: investors are eager to make long-term investments in the mid-market housing sector. They have a preference for affordable homes with stable growth in rents, and the same ambition as the municipality when it comes to guaranteeing long-term affordability in the city. There is a lot of capital available in the market at this time, but the proposed regulation represents an obstacle.
Alexander Buijs, Director Capital Markets

He continues:

Alexander Buijs, Director Capital Markets
In recent years, institutional investors have invested more than €1.6 billion in the construction of over 6,000 rented residential properties in Amsterdam. Much of this was social housing. It is imperative that we make use of the available capital. If the municipality and long-term investors coordinate their aims, there is an excellent opportunity for the city to tackle the housing issue and permanently improve the quality of housing stocks.
Alexander Buijs, Director Capital Markets

The analysis of the government’s plans can be found here.

About CBRE

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at