Hikes in the Dutch transfer tax that were implemented at the start of the year have left property investors wondering when they will see the next bout of housing trades.
The final quarter of 2020 saw a rush of Dutch residential portfolios transacted before the introduction of the transfer tax which came into force in the Netherlands on 1 January 2021.
Said one source: ‘Pretty much everything that was on the agenda to be sold by institutional capital from ongoing disposal programmes was sold last year to circumnavigate the transfer tax. There was a big push of portfolios in Q4.’
Now the law is in force, experts say existing income-producing real estate is being the most affected.
The Dutch parliament legislated to take the transfer tax for immovable property from 6% to 8%, in a move designed to favour first-time home buyers who are tax-exempt if they are 18-35 years old and owner-occupiers. The higher transfer taxes apply to all other forms of real estate that are purchased as an investment but it is said residential investments are being most affected.
Big rush over
Leen van der Marel, partner at law firm DLA Piper, and his colleague Sebastiaan Wijsman, legal director, observe that since the end of the year there has been somewhat of a ‘hesitation’ among foreign investors to buy residential units, especially existing ones. ‘They want to see what effect the tax has on pricing,' they said.
While the impact has been greatest in the residential sector, it has been less so for logistics as a sector. That is because demand has been so hot that it ‘balances out’ the tax rise. For retail property, some distressed sales are materialising with discounts, so again, the effect of the tax is more limited. With offices, investors are still waiting to see how demand for the asset class pans out.
Those investing in the residential sector are interested in situations that mitigate tax or qualify for exemptions. For example, buying land for residential development through a share deal minimises tax costs, while there is also an exemption for buying newly built housing that is less than six months old. However, these chances are limited.
One agent with portfolio sales lined up across Europe, adds: ‘We expect this quarter and potentially next quarter to be really quiet on the portfolio front in the Netherlands. Whenever something comes to the market there will be a disconnect between the bid-ask of would-be buyers and vendors which will create a lag on portfolios closing.’
'We will probably only see a stabilisation of that in maybe Q2 or Q3. But once it does, the amount of capital that is targeting the Dutch market for institutional capital into the multifamily sector means we expect it to really gain pace again in the second half and towards the end of the year – and maybe even further drive up pricing despite the transfer tax.’
Examples of trades that took place in Q4 2020 included Dutch private investor Rubens Capital Partners acquiring a residential portfolio of 17 complexes comprising 707 units across the Netherlands for €135 mln from the country’s rail and transport pension fund. In another deal, CBRE Global Investors acquired a portfolio of 140 apartments and commercial units for an undisclosed sum across Amsterdam’s best locations.