Rents in medium-sized cities are on the rise

In more than ten large and medium-sized cities, rents for non-housing are at highest level ever recorded

The average private sector rental prices are reaching record levels in more and more cities. In the past quarter, the rents of private sector homes in more than ten large and medium-sized cities were at the highest level that Pararius has ever measured there. It is striking that the majority of these cities are located outside the Randstad. Also the average national rent was again higher than Pararius has ever measured. Nationwide, tenants pay on average 5.9 percent more than a year ago when moving into a new rental home in the free sector. These figures are based on 10,671 homes rented out through Pararius in the past quarter. 

In Leiden (+8.4%), Nijmegen (+8.9%) and Enschede (+10.5%), the average rent per square meter increased by at least 8 percent. In Tilburg (+13.6%), Roosendaal (+14.1%), Amersfoort (+15.4%), Almere (+18.8%) and Apeldoorn (+20.2%) the increase was even greater. In all these cities, the average square meter price on Pararius was the highest ever.

The largest growth was measured in Zoetermeer: there, the average rent per square meter per month grew by 20.8% to €11.50 compared to the first quarter of 2017. Zoetermeer is centrally located in relation to the cities of Leiden, The Hague and Rotterdam, making it a fall-back option for home seekers.

In the footsteps of the big four cities
The medium-sized cities where prices rose sharply in the past quarter, follow in the footsteps of large Randstad cities. In these four major cities (Amsterdam, Rotterdam, Utrecht and The Hague), the first suddenly measured a steep rise in prices. The tipping point was reached in Amsterdam in the second quarter of 2016, after which prices developed more moderately. In Utrecht, the tipping point came later: from the second quarter of 2017, a price stagnation in the free rental sector became visible there. According to Jasper de Groot, director of Pararius, there is little room left for price increases in these large cities: “There is a limit to what tenants can pay. If the prices come close to that limit, then the price increase will naturally slow down. In other medium-sized cities, such a rent ceiling has not been reached by a long shot. Prices are expected to continue rising in the coming months,” explains De Groot.

The high rents in the Randstad provinces and the rising prices outside them show that the pressure on the private rental market is increasing. This is also visible on Pararius: a total of over 76,393 house seekers were registered in the first quarter of 2017, an increase of almost 38 percent compared to a quarter earlier.

Amsterdam remains front runner
The price for a free-sector rental home in Amsterdam has remained the highest for years: tenants there pay an average of €22.48 per square meter per month. That is €6.43 more than in the second most expensive city of Utrecht (€16.05). Prices in Amsterdam are still rising only slightly: rental properties became on average 2.2 percent more expensive compared to the first quarter of 2017. This trend can also be seen in Utrecht: new tenants paid on average 1.3 percent more than in the first quarter of 2017.

The difference in price increases between the Randstad and beyond is also visible at the provincial level. Prices outside the Randstad have been rising much faster for several quarters in a row. The largest price increase was measured in Flevoland: there, prices rose by 17.2 percent to €11.55 per square meter per month. Flevoland is now the province with the largest percentage increase for the fourth quarter in a row. “Almere in particular is popular due to its strategic location in relation to Amsterdam. Now that prices in Amsterdam are at their peak, many tenants are moving out to other cities in the area. Almere may be an attractive option for many tenants,” says De Groot.

Also in Overijssel prices have been rising significantly for four quarters in a row. New tenants pay an average of €9.95 per square meter per month, some 13 percent more than the first quarter of 2017. Friesland also belongs in the list of notable risers: after two quarters of declining prices, here prices rose last quarter by 10.5 percent.

Market forces at their best
This brings the average national square meter price for new tenants to €15.56. “The demand for free sector rental housing is increasing faster than the current supply. This is market forces in optima forma,” says De Groot. Two years ago – in the first quarter of 2016 – the average rent was €13.28 per square meter per month. The large price increases in the Netherlands arise from high demand combined with low supply. Particularly in the middle segment – rental properties with a rent between €711 and €1,000 – the shortage is large. This is because a large group of renters in the Netherlands earn too much for a social rental home, but do not have the financial capacity to take out a mortgage for a house to buy.

“A structural solution to the housing shortage in the Netherlands can be found in new construction. Yet that is easier in theory than it appears to be in practice. For example, building permits are still issued at too low a pace and construction companies are faced with major personnel shortages and shortages of building materials. Moreover, the housing shortage is concentrated mainly around the major cities and around the Randstad regions, where little expansion is possible due to a lack of building land,” says De Groot.