Investing in residential real estate in 2025: stricter rules

Falling – and in some cases negative – interest rates led many savers to look for other ways to make their money work for them. While many invested in shares, many also purchased buy-to-let properties.

The return from investing in real estate can be broken down into two elements: the indexed, ‘inflation-proof’ rent and any increases to the value of the investment real estate. Over the past years, real estate prices have risen exponentially thanks to increasing demand and other factors like tax breaks and lower borrowing costs.

However, conditions in the real estate market tend to shift rapidly. For instance, there has been a huge rise in borrowing costs in recent years. If higher mortgage rates aren’t compensated by higher rents, investors get lower returns. This can cause the real estate to fall in value.

Renting out residential real estate involves risk. You might be faced with the following: 

Unoccupied real estate and tenants not paying rent on time or at all

You’ve probably also seen reports of cannabis farms being set up in rental real estate.

Risk of falling house prices

House prices can suddenly drop – like they did in mid-2022. Statistics Netherlands (CBS) revealed that house prices in February 2023 were lower than the same month in the previous year. This was the first time that had happened since April 2014.

House prices have recovered since then, increasing by a record 8.7% in 2024. This was mainly due to low mortgage interest rates, a housing shortage and higher incomes. Wages rose 7.3%, and disposable incomes went up by 3%. Read our latest reports about the housing market.

Changes to laws and regulations

On 1 July 2024, the Dutch government introduced a modernised version of its real estate valuation system, creating a new ‘mid-segment’ for the rental sector. Rents are now established on the basis of a points system for both housing in the ‘low segment’ (former social housing) and the ‘mid-segment’. This previously only applied to housing in the low segment.

This means that the maximum rent for mid-segment real estate with up to 186 points is €1,184.82. You can use a tool to calculate the rent according to the points system. Only landlords in the ‘high segment’ have the freedom to set their own rent. However, this segment is subject to a limit on annual rent increases until 1 May 2029.

Fixed Tenancy Agreements Act (Wet vaste huurcontracten)

Not counting exceptions, a landlord may now only rent out their real estate on permanent tenancy agreements. If the rental yield (net rental income) is too far below the invested capital, this may negatively affect the value of the real estate. After all, renting real estate permanently also makes it hard to predict or plan when you can release its equity.

Tax laws change all the time. For instance, since 2021, the Dutch government has raised property transfer tax in two stages from 2% to 10.4%.

Box 3 tax on real estate is also steadily increasing. If you’re a private real estate investor, you’ll usually be liable to pay box 3 tax on this real estate in your income tax return. This is a tax on your wealth based on a fictitious return (assumed return) rather than the actual return.

However, last year, the Supreme Court of the Netherlands reaffirmed that the design of this tax is unfair. As a result, taxpayers may now choose to be taxed according to their actual return or an assumed return. However, you are responsible for proving that your actual return is lower than the assumed return. The Supreme Court’s instructions on calculating returns have proven to be controversial.

For instance, you cannot deduct costs and you must add unrealised gains to your income. Legislators have adopted the Supreme Court’s instructions in a bill entitled ‘Wet tegenbewijsregeling’, setting out the rules on providing evidence of and declaring actual returns. 

A brand-new box 3 tax regime is currently in the pipeline. As it stands, taxes will be levied on rental income from real estate as well as on any realised gains (from a sale, for instance) from 2028. The tax rate will be set at 36% (the same rate as 2025).

Investing in real estate was very popular for a long time. However, rental yields have been squeezed by rising borrowing costs over recent years and tightening legislation. If you’re a real estate investor, make sure you know how these rules affect you and whether it makes sense to continue investing in real estate.