Due to new government regulation, municipalities can exclude real estate investors from buying middle-income houses in selected neighbourhoods in the Netherlands. Assistant Professor at Erasmus School of Economics Matthijs Korevaar and Professor of Finance and Economics at Erasmus School of Economics Sjoerd van Bekkum, together with their co-authors, studied the effects of real estate investors on housing costs and neighbourhoods. Korevaar was invited by Het Financieele Dagblad to elaborate on some of the study's findings (19 June 2023).
The study focusses on the effect of this new regulation in the municipality of Rotterdam. It concludes that starters on the housing market have a higher chance of buying a house in neighbourhoods where real estate investors were excluded. Nationwide, approximately 2,000 houses were sold to buyers which otherwise would have been sold to investors. This means, however, that tenants with less income must make way for wealthy buyers.
No waterbed effect and no effect on prices
The researchers did not find evidence of a ‘waterbed effect’. I.e., real estate investors did not shift their focus to neighbourhoods without a purchase ban for real estate investors. Neither did the researchers notice a decline in housing prices in these neighbourhoods, which implies that real estate investors may not contribute to driving up housing prices.
The fact that real estate investors used to have a better chance of buying a house than starters in these neighbourhoods may be due to the investors’ stronger position in the conditions of the purchase, Korevaar explains. Specifically, investors are often able to bid on houses with financing reservation, whereas starters need a high mortgage.
Winners and losers
The exclusion of real estate investors in these neighbourhoods increases the chances for starters to buy a house. However, the researchers explain that lower-income tenants may lose. A house that is bought by a real estate investor is often rented out to tenants that have a lower income than buyers. Additionally, these tenants tend to be much younger and more likely to have a migration background than buyers. Finally, many of these tenants are unable to move towards social housing even though they often do meet the income criterium. This is due to the long waiting list for social housing.
