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.

Until 2001, the Netherlands was in the grip of a housing boom, with the EU's greatest increase in property prices reaching up to 15 – 20 percent a year. The Dutch felt it was essential to adjust the prices to a level commiserate with other EU countries. Since then the boom went bust, prices dipped and houses remained on the market for some years.

But for some years now prices in some urban areas have been rising again. Prices rose in Amsterdam by as much as 14 percent in 2007, and they are still going up. This trend is directly related to the lack of houses in these parts of the country.

Confident that prices will remain high or continue to rise, people often decide to buy, rather than rent at high cost. The additional costs of buying (10 – 12 percent) can be easily offset within the three to five years.

Rent or buy?
The general rule of thumb when deciding to buy or rent is whether you plan to reside in the Netherlands for more than five years and if you are (or would be) paying over EUR 1,250 per month for rental accommodation.

The reasons for this are: the market is gradually stabilising, so you have to be willing to make a longer term investment; there are considerable initial costs (10 - 12 percent), so your investment is 110 percent of the purchase price. It takes a minimum of three to five years to recover these costs through tax deductions and rising value of the property. Also, these accrued benefits are not high enough to offset paying off the mortgage for resale until a minimum of three years.

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.

Tax implications for homeowners
Interest payments on mortgages are tax deductible if the property is used as the primary residence and you are registered as a resident taxpayer.
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.

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.

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.

If you leave the country but continue to own the house, the tax deductions disappear as they are based on residency.

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 meant as general guidelines. Individual circumstances will vary. It is always advisable to seek professional help when buying property.

 By Mindy Ran.

Updated 18 April 2008 by Finsens.

[Copyright Expatica 2008]