The Dutch buy-to-let market

Abstract

During the last decade, two developments on the Dutch housing market have received a lot of attention. One of these developments concerns the recovering house prices and specifically the strong price rises in cities. The other development is related to the growth of the private rental sector and particularly the buy-to-let market. This market consists of the private rental dwellings owned by reasonably small private landlords. These landlords predominantly buy owner-occupied dwellings to rent them out, hence the name buy-to-let. The growing buy-to-let market and the recent price rises have often been linked to each other. Some people claim that the buy-to-let landlords are driving up the house prices. Nevertheless, the relation between these two developments has not been properly studied yet for the Netherlands. Consequently, the objective of this study is to gain more insight in the Dutch buy-to-let market in general and specifically the relation between this market and the regional house price development. Mostly quantitative research methods are applied to answer this research question since especially quantitative information on the Dutch buy-to-let market is missing. House price models have for instance been made for Groningen, Breda and Zoetermeer. The research shows that the Dutch buy-to-let market is still quite small as the buy-to-let dwellings only comprise 5% of the total Dutch housing stock. By comparing the house price development of different municipalities with a varying share of buy-to-let, it can be seen that the recent house price increases are on average stronger for the municipalities with a high share of buy-to-let dwellings. It is however possible that these stronger increases are caused by other factors than buy-to-let. When comparing the results of the three regional house price models no big differences in the drivers are found. The results show that the determinants for the house price development are, despite the varying share of buy-to-let dwellings, in general the same for the three municipalities. Furthermore, a buy-to-let indicator could not explain some of the remaining unexplained variance. Based on these results, it can be concluded that none of the results actually point at an inflationary effect of buy-to-let investments. However, because only three municipalities were studied, no general conclusions can be drawn and the possible inflationary effect of buy-to-let landlords cannot be completely excluded.