The temporary measures to restore the wealth tax have turned out badly for many small investors. They have to pay a large part of their return to the tax authorities this year, sometimes 90 percent or even more.
This is evident from calculations by experts with whom BNR spoke. The high rates are the result of the temporary adjustments to the tax system made by the government after the Supreme Court declared the existing tax on wealth illegal.
That decision will cost the government billions of euros in compensation. Temporary measures were supposed to ensure that money was brought in legally again quickly, but they are now leading to extreme and unfair situations, says Jeppe de Boer, Managing Partner of Annexum, a fund that offers small investors the opportunity to invest in real estate .
‘We know of endless examples of dentists, accountants, construction workers and artists who depend on the income from a home or investment fund for their pension,’ says De Boer. According to him, the skyrocketing rates have ‘a disproportionately large impact on their income position’.
‘Lever becomes millstone’
The abolition of the net metering scheme in particular has a major impact. While debts could largely be deducted from assets until 2022, this year fictitious interest costs are used. Shoot the other real interest rates up. This is unfavorable for investors who use debt capital. ‘And in real estate that is almost everyone,’ says De Boer. Because the Tax and Customs Administration is also assuming a return of more than 6% on real estate this year, the effective tax on income from real estate ownership could rise to 90% or higher, about three times more than last year.
‘Politicians here clearly have a blind spot for the interests of the private sector,’ says De Boer. This group is well represented on the rental market with half a million homes, as it turns out figures from Statistics Netherlands. Of these landlords, 80 percent have only one house for rent.
Serge de Lange, partner at PwC and specialist in real estate, also sees that the tax burden on real estate is rising, partly due to the high tax price of borrowed money. ‘The lever has become a millstone,’ says De Lange. ‘A property is suddenly not such a good investment anymore.’
Rental market is emptying, rents up
Due to these tax developments, Annexum no longer invests money in the housing market. In recent years, the fund has invested in around 800 new homes and offices that have been converted into homes.
Rental platform Pararius says that Annexum is part of a larger exodus from the real estate market. The consequences of this are particularly noticeable in the big cities, says Jasper de Groot, founder of Pararius. ‘We are already hearing reports of brokers retraining to become sales brokers because investors are asking them to expand their portfolios.’ Figures from the rental platform show that the number of homes entering the rental market in Amsterdam has halved over the past two years. As a result, rental prices reached record levels: more than 25 euros per square meter.
The low wealth tax in the Netherlands has been a point of criticism for years, but according to De Groot, middle incomes are now falling victim to policies that are precisely intended to tackle inequality. ‘Poor investor, who says that?’, says de Groot. ‘But the increase in wealth tax and the plans for far-reaching regulation of the free sector will lead to even more tightness in the rental market and therefore to even higher rents in the free sector.’
According to de Groot, middle incomes also do not find a safe haven in the owner-occupied market. ‘With a middle income you still don’t earn enough to buy the average Dutch home,’ says De Groot. The price is now just above four tons. ‘Not even if purchase prices fall by 10 percent.’ De Groot thinks that a large group is getting more and more difficult and fears ‘disruptive situations in society’.
Expensive property may be ‘new normal’
Many experts believe that the new tax system, like the old one, will be challenged all the way to the Supreme Court. Like this headlined the Telegraph On Friday that a new battle in court was imminent about box 3. PwC’s De Lange thinks that the legal battle will be ‘very exciting’. He himself sees the most in a rebuttal scheme, in which a fictitious return is the starting point of the tax assessment, unless someone can demonstrate that this return has not been achieved. Effectively, the notional rate then becomes an upper limit. “But maybe the current fiscal climate is just the new normal. That’s a real wait and see.’
In response to the criticism, responsible State Secretary Martin van Rij (CDA) in a letter to Parliament already announced that the fictitious rates may be adjusted again. For real estate, there would then be separate rates for rented and unlet, residential and other real estate. De Boer, however, speaks of ‘a finger exercise’. “There is no concrete proposal yet, but let’s hope it goes down. That would mean that they listened carefully to the market.’
