In one of our previous blogs, we discussed the content and opportunities of the new Affordable Rent Act. In order to continue to invest successfully in the Dutch housing market, it is essential to comply with all new laws and regulations. Therefore, BRXS' acquisitions will always have to be 'Affordable Rent Act Proof'. With this vision in mind, BRXS has acquired two new properties in Arnhem that are fully compliant.
In this blog, we discuss all the ins and outs of the two newly acquired investments at Gildemeesterplein and Gamerslagplein in Arnhem.
- Why Arnhem as a City?
- De Gilde
- De Gamer
- How do the properties relate to the Affordable Rent Act?
- Conclusion: What Are the Pros and Cons?
Why Arnhem as a City?
Residents
Arnhem is the 13th largest municipality in the Netherlands in terms of population, with 167,651 inhabitants (as of 1 January 2024). The Regional Population and Household Forecast 2022-2025 by the Netherlands Environmental Assessment Agency and CBS predicts growth of almost 14% by 2035, reaching over 185,000 inhabitants. As young people increasingly move to cities for education and work, municipalities with more than 100,000 inhabitants are expected to continue to grow.
Students
Arnhem is home to around 10,000 students, of whom around 12,000 study in the city. The city is home to five universities of applied sciences, including HAN University of Applied Sciences, ArtEZ University of the Arts and Van Hall Larenstein University of Applied Sciences. Arnhem also offers plenty of activities for students, such as nightlife at the Korenmarkt, shopping in Klarendal and various cultural events in places like Sonsbeek Park.
Housing
Due to the large influx of people into the city and its continued growth, there is a growing housing shortage in Arnhem, in addition to the current housing crisis. According to the municipality, 16,000 apartments will have to be built by 2040. Today, an average room in Arnhem costs around €457.
De Gilde
Location
One of the properties acquired is located at Gildemeesterplein. This apartment is approximately 84 m² and is located in an apartment complex above the Presikhaaf shopping centre. This shopping centre includes four large supermarkets, several specialist shops and major chains such as Blokker, Hema, Xenos and Kruidvat. The HAN University of Applied Sciences is also within walking distance, making the location ideal for students.
Rental Situation
The apartment has four bedrooms and was rented to four people before the licensing requirement came into force, so transitional legislation applies. This allows for house-sharing and allows the property to be rented to four people, providing additional accommodation for students. All four tenants have individual rental contracts and pay rent and service costs. The basic rent the tenants pay annually is €15.600. Next to that tenants pay a service cost for the cost to cover their utilities (gas, water and electricity, internet etc.) and this is for 2024 a total amount of €5.280, bringing the total rent including service cost to approximately €20,880 per year. The service fee is based on actual usage and recalibrated at the end of each year: meaning if tenants used less than they paid for that year they get money back, if tenants used more than they paid, they have to pay an additional one time extra charge and the service fee might be increased for the coming year. The basic rent covers the HoA, cash reserves and management fees. After deducting all costs from the basic rent this apartment offers a net yield of 5%.
Risk
Due to the significant shortage of housing and the growing demand for housing, it is expected that there will be no vacancies. The average price of a room in Arnhem is €457, while De Gilde rents at an average of €400 per room, including gas, water and electricity. On Kamernet there are currently 311 seekers and only 3 rooms available with a maximum rent of €400. It is expected that these rooms will be rented quickly. Due to the imbalance between high demand and low supply, it is expected that the rooms will always be rented at this price, making the risk for De Gilde low.
De Gamer
Location
The second property acquired is located at Gamerslagplein. This apartment is approximately 84 m² and is within walking distance of De Gilde, making it easy to reach both the shopping centre and HAN.
Rental Situation
The apartment also has four bedrooms and was rented to four people before the licensing requirement came into force, so transitional legislation applies here as well. This allows for house-sharing and allows the property to be rented to four people, providing additional accommodation for students. All four tenants have individual rental contracts and pay rent and service costs. The basic rent the tenants pay annually is €18.315. Next to that tenants pay a service cost for the cost to cover their utilities (gas, water and electricity, internet etc.) and this is for 2024 a total amount of €5.052, bringing the total rent including service cost to approximately €23,364 per year. The service fee is based on actual usage and recalibrated at the end of each year: meaning if tenants used less than they paid for that year they get money back, if tenants used more than they paid, they have to pay an additional one time extra charge and the service fee might be increased for the coming year. The basic rent covers the HoA, cash reserves and management fees. After deducting all costs from the basic rent this apartment offers a net yield of 5%.
How Do the Properties Relate to the Affordable Rent Act?
Affordable Rent Act - Non-Self-Contained Units
Apartments rented to multiple individuals (house sharing) are valued according to the Housing Valuation System for Non-Self-Contained Units (HWS-N). Under the new legislation, the maximum rent limits for non-self-contained units will be increased by 25%. In addition, the quality and sustainability of properties have become more important. With the modernisation of the HWS-N, it is now possible to apply more market rents for non-self-contained units than was possible under the old legislation. According to BRXS’ own calculations, the average room in the HWS-N calculation is €385, resulting in a total annual basic rent (in accordance with the points) of approximately €18,500. This means that the properties comply with all regulations, and De Gilde even charges less than the legally permissible amount.
Conclusion: What Are the Pros and Cons?
General
Every investment involves risk. Risk and return go hand in hand, i.e. a higher risk generally means a higher return and vice versa. Below is an overview of some of the reasons why De Gilde and De Gamer are good investments and the risks involved.
Cons
The potential risks of De Gilde and De Gamer as estimated by BRXS are as follows:
- Maintenance-intensive: In general, students tend to treat the property differently, which means that BRXS has to do more maintenance than, say, a property rented to two young professionals;
- Higher turnover rate: As students tend to stay in one place for a shorter period of time, BRXS receives more cancellations and has to find new tenants more frequently. This increases management intensity.
Pros
Below is an overview from BRXS' analysis of why these properties were purchased:
- Affordable Rent Act proof: Since the HWS-N score for De Gamer matches the current rent and for De Gilde the score even exceeds the current rent, the properties fully comply with the laws and regulations, mitigating legal risk;
- Affordability: BRXS estimates that there will always be students willing to pay €385 in basic rent for a room in a location above a shopping centre and next to a large university like HAN. Thus, the risk of vacancy or potential rent reduction is very low;
- Location: By buying in major cities, it is expected that the value of the properties will continue to increase each year. This enables BRXS to potentially pay out a bonus interest to investors in the future.
Conclusion
According to BRXS, the benefits outweigh the disadvantages, leading to the decision to offer notes to finance these properties to investors with a very manageable risk and a good net return of 5%. De Gamer is already available for investment in the BRXS app and De Gilde will be released in the coming weeks.
