Understanding leasehold (erfpacht) in Amsterdam: What expats need to know
In Amsterdam, around 200,000 homes are built on land owned by the city rather than the homeowner. This system, known as erfpacht (leasehold), requires homeowners to pay ground rent, or canon, to the city. Unlike freehold properties, where land ownership is included, leasehold properties come with additional costs that can increase as house prices rise.
How ground rent works
Homeowners in Amsterdam with leasehold properties pay ground rent, calculated based on the land value as determined by the city council. As property values rise, ground rent costs have significantly increased for many owners.
A 2017 opportunity to fix ground rent costs
In 2017, Amsterdam introduced an option for homeowners to lock in their ground rent rate or pay it off entirely. This fixed amount is based on the property’s valuation in 2014 or 2015, whichever is lower, along with a 35% discount. Given the sharp increase in property values since then, this option can offer substantial savings for homeowners.
Why act now?
The offer to fix or buy off ground rent expires at the end of December 2019, yet only about 30,000 homeowners have applied. Outside the city centre, where ground rent is relatively low, only 2% of homeowners have opted to lock in or buy off their ground rent.
Is freezing ground rent right for you?
While every financial situation is unique, fixing or buying off ground rent can provide stability and financial benefits, particularly if you plan to sell the property in the future. Freezing ground rent could make your property more appealing to buyers, adding certainty to the overall costs.
Impact of rising house prices on ground rent
Without action, ground rent will continue to increase alongside property prices. The homeowners’ lobby group, Vereniging Eigen Huis (VEH), estimates that current ground rent could be up to 60% higher if based on 2018 valuations. For instance, an 80-square-metre apartment in Amsterdam Noord could see ground rent rise from €190 to €1,750 per year if no action is taken.
Future considerations for homebuyers and borrowing
As the leasehold structure affects property value, some banks may factor in ground rent when calculating mortgage amounts. Buyers might face stricter borrowing requirements if ground rent is not fixed, potentially impacting their loan eligibility.
Impact on property value
Securing a fixed ground rent rate could positively affect your property’s value. Properties with predictable additional costs, such as fixed ground rent, are generally more attractive to buyers than those with variable rates.
Apply by December 2019
The deadline to apply to freeze your ground rent is fast approaching. Use the city’s online tool to calculate costs and submit your application at erfpacht.amsterdam.nl/portaal/login/. The tool is available in Dutch, but it’s relatively straightforward; consider asking a Dutch-speaking friend for help if necessary.
Expect delays
If you decide to apply, don’t expect a quick response from the council. Due to the increasing number of applications, processing times are now extending into several months. Don’t wait—act now to secure your financial future.
