The Dutch election result points to a continuation of existing policies

Preliminary results from Wednesday’s General Election in the Netherlands appear set to keep incumbent Prime Minister Mark Rutte in power at the head of a new coalition government. The populist PVV (“Freedom Party”) did manage to increase its representation in the 150-seat Dutch parliament to 20 from 15 seats, but this was well short of what was needed to become the largest party. That position remains with Rutte’s centre-right VVD party. The VVD actually saw their number of seats fall from 41 to 33, but this is enough for them to become the lead party in a new coalition government.

Despite the VVD win, the electorate proved to be rather divided. Behind runner-up PVV, the CDA (Christian Democrats) and D66 (Democrats) received 19 seats each, followed by 14 seats for the SP (Socialist Party) and GroenLinks (Green Party). The remaining 31 seats are divided amongst seven other parties, ranging from two to nine seats.

As a result of the fragmented voting pattern, it will require at least four parties to form a majority coalition—which will be Rutte’s preferred choice. Based on recent statements by Rutte, he will likely exclude the PVV as the VVD has reasonable options to find partners in the other parties. While a VVD-led government is the most likely result, Dutch coalition governments take time to form, 96 days on average over the past 50 years.

The new coalition is likely to continue existing economic policies. This means a generally pro-business attitude, fiscal expansion in 2017 and a pro-EU stance, though with some resistance to further political and economic integration. There could also be a harsher stance on non-EU migration.

With stable rents across the broader commercial real estate market and rising rents for Amsterdam offices, the result will help to prolong the buoyant investment climate that was evident in the Netherlands during 2016, in which activity exceeded the previous record high set in 2007.

The turnout in the Netherlands was almost 80%—the highest result in ten years—highlighting its importance for the country. The Dutch election was the first of three major general elections in Europe in 2017—the other two being the French presidential election (in two rounds, if, as is almost certain a second round is needed, in April and May) and the German election later in the year. The surprise results of the U.K.’s EU referendum, the U.S. presidential election and the landslide defeat for the government in the Italian referendum on constitutional change have led to a feeling of “expect the unexpected” whenever an election comes up. The PVV’s performance in the Netherlands may indicate that populist candidates may not make as many inroads in Europe as some had expected. It was not the first reversal for populist parties—who suffered setbacks in the Hungarian referendum on migration and the Austrian presidential election—but it is the most significant so far.

Eyes will now turn to the French presidential election, where the anti-Euro populist leader Marine Le Pen is mounting a strong challenge. Opinion polls, however, suggest that Le Pen may win the first round but is unlikely to win the second round—which will most likely be against Emmanuel Macron, a former Economics Minister who is espousing a reform agenda to spur economic growth. This is also likely to be followed by Angela Merkel’s re-election in the German federal elections later in the year.

A string of electoral victories for centrist parties, together with improving economic sentiment and prime occupier markets activity, would re-enforce the currently buoyant property investment climate in Europe. However, we can expect challenges over the coming year from the next round of negotiations over the Greek bailout and the likely gradual normalisation of European Central Bank monetary policy.

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