Predicting Rental Prices: These Factors Influence
Explore the factors affecting rental prices and discover forecasts for the future rental market.
The rental prices in the private sector have been skyrocketing for a long time, but the increase has been less steep in the past year. Similar to the continuously rising prices of homes for sale, the question arises whether rental prices will continue to rise or gradually decrease. Various factors influence this, such as the persistent demand for rental properties in the private sector. There are also rules governing rent increases that landlords must adhere to when renting out a property. To make predictions about rental prices, it is important to have an understanding of the factors that influence them.
Tightness in the housing market
One of the factors that influence rental prices is the tightness in the housing market. There is still a high demand for private sector rental properties while the supply is limited. This suggests that rental prices will continue to rise, especially in the context of the tightness in the housing market for home purchases. The supply is so low that people looking to move are primarily reliant on private sector rental properties. Additionally, there are many first-time renters who cannot afford to buy a home and therefore opt for renting.
Largest supply in the higher segment
The demand for rental properties is still much greater than the supply. In the middle segment with rents up to 1,000 euros, there is a very limited supply available. In this regard, there has been a decrease in the supply of rental properties in the middle segment and an increase in the number of properties in the higher segment, such as those above 1,000 euros. However, it is not the case that rental prices continue to rise everywhere despite these developments. Especially in urban areas, there is some stagnation in this regard.
Stagnation in major cities
The stagnation in rental prices is partly due to the fact that expatriates were less present in cities like Amsterdam in 2020. There has been a slight decrease in rental prices over the past year, as well as in Eindhoven and The Hague. The slight and likely temporary decrease can be logically explained. Expatriates generally have no problem paying high rents. When expatriates stay away, properties become vacant, and to cope with the vacancy, rental prices have slightly decreased.
Return of expatriates
It is expected that the expatriate market will pick up later this year, which means there will be more demand for private sector housing again. This could lead to rental prices in cities like Amsterdam and The Hague rising once more. The supply remains the same, but a new group of renters will be looking for housing. The problem of tightness in the housing market for rental properties is not easily solved.
New tenants
When a rental property becomes available in the private rental sector, new tenants typically face a new rental price. The landlord is then free to increase the rent at the start of the new rental period as they see fit. There are no restrictions on the legally allowable increase, as there are with the annual rent increase. A change in tenants thus has an impact on rental price increases. It may be on a micro level since it involves individuals, but it does lead to an increase. When all rental price increases for new tenants are added together, it results in an increase in the average rental price.
Maximum annual rent increase in 2021
For existing tenants, landlords are allowed to implement an annual rent increase. In 2021, specific rules apply to the maximum rent increase in the private sector. This means that rent prices can only increase by a limited amount. As of May 1, 2021, the maximum annual rent increase for private sector rental properties is limited to 2.4%. However, there is an exception, which is when there are improvements to the rental property. This rent increase is allowed in addition to the annual rent increase. Regular maintenance does not count as an improvement, but adding a second toilet or double glazing does.
Maximum rent increase until May 1, 2024
The formula for the 2.4% increase includes 1% plus inflation. In this case, inflation refers to the decrease in the value of money. Therefore, the maximum rent increase is 2.4% for 2021. This rule applies not only for 2021 but also for the years 2022 and 2023 until May 1, 2024. If the rental contract specifies a lower percentage, that will be applicable. If the rental contract specifies a higher percentage, the legal percentage of 2.4% takes precedence.
Increase in service charges
While there is a limitation on rent increases in the private sector, this does not apply to service charges. In addition to raising the rent, landlords have the option to increase service charges, which are in addition to the basic rent of a property. However, landlords are required to provide transparency regarding the service charges and provide a reason for the increase. For example, it may be due to an increase in cleaning costs for an apartment building.
Decrease or increase in private sector rental prices?
Considering all the factors that influence rental prices for properties in the private sector, a decrease is not expected. The housing market is still too tight, keeping the demand high. Additionally, expatriates are returning to the Netherlands, increasing demand for private sector rentals, and there is still an annual rent increase in effect. While it has been restricted for the coming years, it still contributes to an overall increase in rental prices.
However, price differences vary greatly by region in the Netherlands. Rental prices in rural areas are rising more slowly than in major cities, where demand is higher. Furthermore, new construction is not progressing rapidly in the Netherlands. In this regard, the prediction is that rental prices in the private sector will continue to rise for the foreseeable future.
Do you own a house or apartment that you want to rent out? Our rental department specializes in the rental of properties in Amsterdam and the surrounding area, as well as in Amstelveen. Feel free to contact Amstellandmakelaars for more information."
