ARE YOU LOOKING FOR A NEW HOME?

The Dutch Housing Market

During the Covid pandemic, the housing market experienced a boom. Then, in 2022, due to economic insecurity, inflation and increased interest rates, the price hike slowed down. In 2023, the housing market remained similar to 2022; though it became a bit tighter as there were more people looking for houses than houses being put on the market. Wages were rising and people were looking for freestanding houses or apartments rather than row or corner houses.

Developments 2023

Compared to the second quarter of 2023, prices were up 1.7% in the third quarter of 2023, but down 1.7% compared to the year before. House sales went up 7% for houses whose asking price exceeded € 500,000 and down 6% in the lower-priced market, and the average sales price in the third quarter of 2023 was € 422,000. The average asking price, however, went up from € 500,000 in 2022, to € 544,000 in the third quarter of 2023. Though there were certain regions in the Netherlands where prices went up more than 6%, this was not the case in the bigger cities, where is stayed between 0.5% and 1.6%. In 2023, approximately 45% of houses sold at (an average of 0.2%) more than the asking price – in 2022, 64% sold at 3% more than the asking price. At the start of the year, houses spent an average of 42 days on the market before being sold, but this steadily decreased to 33 days in the third quarter – which was still more than 25 days in 2022.

Finding a House

There is a considerable variety of properties to choose from. The best way to explore the market is by looking at Internet sites such as www.funda.nl (in Amsterdam www.mva.nl), www.jaap.nl, or www.zah.nl.

To Buy or to Rent

Of course, there are a lot of benefits to buying a house. Apart from the fact that you own real estate of which the price may increase, there is the advantage of a tax relief on the mortgage interest – it is tax-deductible if the house is your principal place of residence. In addition, a number of the costs related to the financing of the house are also tax-deductible. These are both issues that this article will come back to, further on.

Although at first sight it might seem an attractive option to buy a house, it is a decision that needs serious and careful consideration. A disadvantage when buying real estate in the Netherlands is that you have to pay approximately 6% of the purchase price as one-time buyers’ expenses. In addition to this, homeowners must add the so-called deemed rental value (eigenwoningforfait – you can read more about this further on) to their taxable income and pay taxes over this.

As a result, the break-even point between rent or buy usually occurs after a few years, assuming that housing prices remain constant. Bearing in mind that expatriates usually stay in the Netherlands for a relatively short period, this is an important issue to keep in mind.

Of course, if you rent a house, you circumvent a lot of the problems and risks, but you also miss out on the possible benefits.

Real Estate Agent

Taking into account your likely lack of knowledge of national laws and regulations, you are advised to enlist the services of a real estate agent when looking for a house. Try to find a real estate agent in the city or town you want to buy in, as issues such as bidding systems, zoning plans (bestemmingsplan), soil contamination and city council regulations are items that are specific to each city.

Real estate agents charge a brokerage fee (courtage) for their services. This is usually between 1 to 2% of the purchase price of the house, though with some realtors the percentage is negotiable. The height of the fee depends the specific services offered; some real estate agencies offer an expat service package.

Basically every agent connected to the largest trade organization NVM has the same information available through the multiple listing system www.funda.nl.

Renting a Property

Different types of rental properties are possible, depending on the landlord:

·         Unfurnished (Ongemeubileerd). Nothing is included.

·         Semi-furnished (Gestoffeerd). Some furnishings and carpeting.

·         Furnished (Gemeubileerd). The apartment is ready to be moved into. Utilities are (usually) included.

The Rental Contract

Many rental contracts have been especially designed to meet the needs of expatriates, and include an English translation. A rental contract usually includes the following items: the rent; a deposit (sometimes one month, often 2-3 months); an annual adjustment of the rent; user’s costs (utilities, municipal levies and garden maintenance); the so-called diplomatic clause (see the following paragraph); the brokerage fee; a clause on minor repairs; a clause regarding the yearly cleaning of the central heating system, water boilers, chimneys, gutters and draining pipes; and the obligation to return the property in the same condition (normal wear and tear excepted).

Diplomatic Clauses in Rental Contracts

Both the lessor and the lessee may ask for a diplomatic clause to be included to ensure that, even though the rental contract may not have expired, the property can be vacated after a notification term mutually agreed upon in advance. For instance, in case the lessor has been posted abroad, but is relocated to the Netherlands, or if the lessee is relocated abroad or to another location in the Netherlands.

Special Treatment Under 30%-Ruling

In principle the full benefit resulting from the fact that your employer is providing you with housing is a taxable benefit. If you benefit from the 30%-ruling, special rules apply. A part of the rent may be qualified as an ‘extraterritorial expense’ (expenses that you incur because you do not live in your home country). That part of the rent can be compensated free of tax (thus reducing the amount of the fixed 30%-allowance!)

If you are a non-resident of the Netherlands, any compensation of double housing expenses is regarded as compensation for extraterritorial expenses: tax-free, but resulting in a reduction of the 30%-allowance.

Buying a Property

Before embarking on the actual process of finding a house to buy, make sure you first contact a bank or mortgage broker to discuss whether you will be able to take out a mortgage here, to what amount you can do this and what the related monthly expenses will be. Having clarified these points will allow you to focus on finding a new home – without being faced with unpleasant surprises just when you think you have found one.

Keep in mind that you will have to make a deposit of approximately 10% of the purchase price – due approximately five weeks after the deal has been made, and arranged by the mortgage advisor or the bank itself by means of a bank guarantee issued by a Dutch banking institution.

Resolutive Conditions Mortgage

If you need to obtain a mortgage to finance the purchase, any purchase agreement should be made subject to financing. If necessary, other resolutive conditions should be part of the agreement, such as (if applicable) being able to obtain a permit to occupy the real estate, or even more importantly, the option of having a constructional survey carried out.

Costs

As a general rule, the costs of purchasing a house in the Netherlands amount to approximately 6% of the price of the house (this is not the same as the 10% down payment!). These expenses include, among others: the appraisal fee (for the mortgage); notary costs, estate agent fees, registration fees, a fee for the structural survey of the house, transfer tax, etc.

Tax-Deductible Costs

The following costs are tax-deductible and can be declared (one-time) on your income tax return: the notary costs for mortgage deed; the mortgage commission fee (paid either to the bank or the broker); the cadastral registration fee; the cadastral investigation fee; the appraisal (taxatie) fee; the administration fee (afsluitprovisie) for the mortgage deed; and the bank guarantee fee.

Mortgage Expenses Deductible

The most important reason to buy real estate – instead of renting it – is most probably the fact that interest paid on a mortgage is deductible when you use the house as your principal place of residence.

In recent years, the government has been re-evaluating its overall mortgage legislation, resulting in a lowering of the maximum rate of deductibility (from 52% to 38% by 2028), but also in the following measures: mortgage interest is deductible over a maximum period of 30 years, provided the mortgage provides for monthly redemption payments (straight line or annuity), and the maximum mortgage amount is 100% of the purchase price of the property. Consequently, the additional expenses related to buying a house can no longer be completely financed by means of the mortgage so that buyers will ultimately have to bear these costs themselves.

What Type of Mortgage?

You should seek proper advice on the type of mortgage that is suitable in your situation, particularly in view of the limited period of time during which you may need the mortgage. Do not forget to inform the bank if you are benefiting from the 30%-ruling. If the mortgage is linked to a capital insurance, you may be faced with additional tax consequences. Be sure to get expert advice!

Deemed Rental Value and WOZ-Value

Those who own a house and use it as their principal place of residence have to report a certain amount – related to the home ownership – on their income tax return. This amount is a percentage of the value of the house, and is called the eigenwoningforfait (or deemed rental value). The eigenwoningforfait based on the official value of the house, also known as the WOZ-value, which is determined every year by the municipality. Every year, the owner receives a so-called WOZ-beschikking (WOZ-decision), ‘confirming’ the value of the house, which is used as a basis for determining a number of levies and taxes and has been created in order to rule out the possibility of arbitrariness.

The general applicable rate of the eigenwoningforfait is 0.75% of the WOZ-value.

The balance of the deemed rental value and the interest can be deducted from your income.

Preliminary Tax Refund

You can receive a tax refund on the mortgage interest deduction every month by requesting a preliminary negative tax bill from the tax authorities. This is done by means of a special form. The tax authorities will then deposit the refund directly into your bank account.

Buying a Property

Before embarking on the actual process of finding a house to buy, make sure you first contact a bank or mortgage broker to discuss whether you will be able to take out a mortgage here, to what amount you can do this and what the related monthly expenses will be. Having clarified these points will allow you to focus on finding a new home – without being faced with unpleasant surprises just when you think you have found one.

Keep in mind that you will have to make a deposit of approximately 10% of the purchase price – due approximately five weeks after the deal has been made, and arranged by the mortgage advisor or the bank itself by means of a bank guarantee issued by a Dutch banking institution.

Resolutive Conditions Mortgage

If you need to obtain a mortgage to finance the purchase, any purchase agreement should be made subject to financing. If necessary, other resolutive conditions should be part of the agreement, such as (if applicable) being able to obtain a permit to occupy the real estate, or even more importantly, the option of having a constructional survey carried out.

Costs

As a general rule, the costs of purchasing a house in the Netherlands amount to approximately 6% of the price of the house (this is not the same as the 10% down payment!). These expenses include, among others: the appraisal fee (for the mortgage); notary costs, estate agent fees, registration fees, a fee for the structural survey of the house, transfer tax, etc.

Tax-Deductible Costs

The following costs are tax-deductible and can be declared (one-time) on your income tax return: the notary costs for mortgage deed; the mortgage commission fee (paid either to the bank or the broker); the cadastral registration fee; the cadastral investigation fee; the appraisal (taxatie) fee; the administration fee (afsluitprovisie) for the mortgage deed; and the bank guarantee fee.

Mortgage Expenses Deductible

The most important reason to buy real estate – instead of renting it – is most probably the fact that interest paid on a mortgage is deductible when you use the house as your principal place of residence.

In recent years, the government has been re-evaluating its overall mortgage legislation, resulting in a lowering of the maximum rate of deductibility (from 52% to 38% by 2028), but also in the following measures: mortgage interest is deductible over a maximum period of 30 years, provided the mortgage provides for monthly redemption payments (straight line or annuity), and the maximum mortgage amount is 100% of the purchase price of the property. Consequently, the additional expenses related to buying a house can no longer be completely financed by means of the mortgage so that buyers will ultimately have to bear these costs themselves.

What Type of Mortgage?

You should seek proper advice on the type of mortgage that is suitable in your situation, particularly in view of the limited period of time during which you may need the mortgage. Do not forget to inform the bank if you are benefiting from the 30%-ruling. If the mortgage is linked to a capital insurance, you may be faced with additional tax consequences. Be sure to get expert advice!

Deemed Rental Value and WOZ-Value

Those who own a house and use it as their principal place of residence have to report a certain amount – related to the home ownership – on their income tax return. This amount is a percentage of the value of the house, and is called the eigenwoningforfait (or deemed rental value). The eigenwoningforfait based on the official value of the house, also known as the WOZ-value, which is determined every year by the municipality. Every year, the owner receives a so-called WOZ-beschikking (WOZ-decision), ‘confirming’ the value of the house, which is used as a basis for determining a number of levies and taxes and has been created in order to rule out the possibility of arbitrariness.

The general applicable rate of the eigenwoningforfait is 0.75% of the WOZ-value.

The balance of the deemed rental value and the interest can be deducted from your income.

Preliminary Tax Refund

You can receive a tax refund on the mortgage interest deduction every month by requesting a preliminary negative tax bill from the tax authorities. This is done by means of a special form. The tax authorities will then deposit the refund directly into your bank account.

This article is based on chapter A Place to Live of The Holland Handbook.