The Dutch property market: should you rent or buy

In some urban parts of the Netherlands, the Dutch property market has boomed, stabilised and, recently, risen again. So should an expatriate buy or rent a house? We give you some pointers.

Finding the perfect home is not easy in the densely populated Netherlands. The Dutch housing market is characterised by low owner-occupancy and the biggest social housing sector in Europe. In the past, governments have promoted house ownership with some success using financial incentives such as making mortgage interest tax-deductible. Just over half of the housing stock is now owner-occupied, more in rural areas than major cities. In the past year, more houses have become available in the private rental sector as many people put their houses on the rental market, waiting for a better sellers’ market and minimising their double housing expenses.

On 1 July 2011, the Dutch government decided on a regulation to boost the Dutch housing market. The transfer tax will be reduced for a period of one year from six percent to two percent.

Rent or buy?
The usual advice offered is that if you are here for more than three to five years and are paying a significant rent (say EUR 1,500 a month or more), you are better off buying. Buyers who may wish to retain the property and rent it out in the future, should make sure that there is a scenario whereby-- given the restrictive ‘verordening’ in Amsterdam-- the legal rent that they are permitted to charge covers costs. The main incentive for potential buyers is that mortgage interest payments are tax-deductible if the house is your main residence, However, there is ongoing political discussion regarding phasing this out. Obviously, this can’t be done overnight and, with a right wing government in office, this issue has been shelved for the time being. Expats are advised to buy only if they will be in the Netherlands for three years minimum mainly due to the recovery of start-up costs involved in buying property (around 8-10 percent of the purchase price).  But, with an increase in interest rates, recovery could take longer.  If you are only here for a couple of years, renting is likely your best option. Contract costs are fixed, repairs and maintenance are the landlord's headache and contracts can be ended if you need to return home.

First, find your home
Properties to rent (te huur) and to buy (te koop) are in newspapers and agency websites including Funda.nl, the national database of the Nederlandse Vereniging van Makelaars (NVM), the Dutch Association of Estate agents. There are many agencies specialising in expats (be wary of those which charge a registration fee) which can steer a path through the local market. The downside of using an agency is the commission or finder’s fee. A month’s rent (plus 19 percent tax) is the going rate. On the other hand, by not using a reputable agent, you run the risk of renting an illegal apartment, being removed by a ‘handhavings’ action, not recovering your deposit, being bound by an unreasonable contract and paying too much. Most agents who list their rentals at www.funda.nl do not charge tenants a brokerage commission since they charge their fee to landlords. If you’re baffled by real estate terminology, try a website like www.pararius.com with searches in six languages. "However," says Mike Russell of Perfect Housing, "Be aware that pararius.com lists unscreened properties and there is no verification that the listing agent has actually seen them."   In urban areas, rentals start at EUR 900 upwards, although most people will not qualify for these properties as they either earn too much or have no required link with Greater Amsterdam.

Benefits of renting
For assignments of less than three years, in the current market, it is almost always better to rent. Rental costs are fixed, contracts can be ended if you need to go back home, and the headaches of repairs and maintenance are the landlord's responsibility. Also, there is no loss through having to resell before your costs can be covered, or the hassle of waiting for the property to sell should the market slow again

Benefits of buying
Rent is not tax-deductible and, if your employer either pays the rent or contributes to a housing allowance, it is taxed as a benefit. Buying a house can offer very good tax deductions and benefits if you are a long-term resident.

1. Interest payments on mortgages are tax deductible if the property is used as the primary residence and you are registered as a resident taxpayer.
2. Expenses relating to the closure of the mortgage are tax deductible. In terms of the notary, costs to conclude the contract are also tax deductible, but the costs of transfer are not.
3. Increases in the value of the house are tax-free if used as a primary residence as there is no capital gains tax, but can have an impact on the amount of mortgage-interest deductible if you use the profits to purchase your next home.
4. Tax will be levied on the ‘deemed rental value’ of the house (compared to deductions allowed for interest, this amount is normally quite low). This value is determined by the local municipality and will be used by the tax authorities.
5. If you leave the country but continue to own the house, the tax deductions disappear as they are based on residency.
6. The 30 percent ruling may have a positive impact on your ability to get a mortgage, or the amount you might be eligible for.

These are only just general guidelines. Individual circumstances will vary. It is always advisable to seek professional help when buying property

Source: www.expatica.com