Considering buy-to-let? Here’s why it’s a bad move at the moment

For several years, buy-to-let has been a good choice for expats wanting to invest in the Netherlands. But a number of recent political decisions means that it no longer makes sense to do so, says financial advisor José de Boer from De Boer Financial Consultants.

One of the hottest topics in my mailbox at the moment is buy-to-let, or buying a house to rent out to other people as an investment. This has been, for good reasons, a popular phenomenon in the Netherlands for quite a while now. However, a number of developments in the housing market have made buy-to-let a much less positive choice at the moment. 

There are several reasons for this, many of which are, ironically, linked to the shortage of both rental properties and properties to buy in the Netherlands.

Council restrictions

Firstly, many local authorities have brought in restrictions on who can live in certain properties. Some, for example, want to reserve homes specifically for teachers or police officers. Others have made it a rule that you must live in a property yourself for up to four years before you can move on and rent it out to someone else.

On top of that, some local authorities have introduced a minimum purchase price. In Amsterdam, for example, you can’t rent out a property that costs less than 550.000 euros to buy, unless the tenant is a close family member or you temporarily relocate abroad.

Keep in mind that these are local government restrictions and it differs widely from city-to-city. But there are also nationwide implications to think about, such as taxes. For example, your assets are collected in “Box 3” of the annual Dutch tax return for tax purposes and second homes are more heavily taxed at the moment than stocks / shares and savings.

Property taxes

It is very likely that in 2024, the taxes associated with owning property will go up even more because you will no longer be able to deduct your Box 3 debt (buy-to-let property) against your Box 3 assets (rental property).

Be aware too that banks don’t lend more than around 50% of the market value of a property that is going to be rented out, so you will need to be able to put in a considerable amount of capital as well. Interest rates too are higher for buy-to-let properties, which means your monthly payments will also be higher.

Other changes

The government had more changes in the pipeline, such as increasing rent controls to cover more property and getting rid of two-year rental contracts. That would mean if you have to get rid of your property, you may then have to sell with a sitting tenant, which will have an impact on the price.

New government

Of course, we don’t know if the next government will carry on with these policies or not and it could take a year or more to find out because the general election is not until November. But it is clear that the measures which have already been introduced are encouraging some landlords to sell, particularly if they own a small property that could be covered by rent controls.

Many estate agents state that they have more ex-rental properties on their books, particularly in the bigger cities. They tend to be the smaller investors with a couple of properties that they see as their pension, but since being faced with higher taxes and everything else, they have decided to take the money instead.

No longer an attractive option

Rental housing in the Netherlands may have been a stable and attractive way of investing your money in the past, but at the moment there are just too many question marks. It might seem odd that a mortgage broker is telling you not to buy a place to rent out, but I feel that I would be failing in my duty as a financial advisor if I did not give you the complete picture.

Buying a house is so much more than just seeing a property you like and signing on the dotted line. It is a complicated, life-changing process, so it is wise to get all the help you can get before you start. De Boer Financial Consultants helps expats find the right mortgage for their situation.