For the housing market in the Netherlands, 2016 was a strong year. Higher Dutch house prices, lower mortgage interest rates and greater confidence in Dutch real estate has encouraged more expats to own rather than rent.
Over the past year, the Netherlands’ real estate market has made some headlines with steadily climbing Dutch house prices and record-breaking confidence in the market, though some forecasts, notably by the European Systemic Risk Board (ESRB), warn of impending financial instability due to Dutch real estate conditions—though the Dutch government has already taken steps to address these issues.
We review the year in the housing market in the Netherlands and looks towards the future.
Dutch property market in 2016
According to the Dutch Housing Market Quarterly, since the third quarter of 2013, the number of Dutch house sales has risen steadily—averaging 25 percent each year, a remarkable increase. For 2016, the number of Dutch house sales is expected to reach at least 210,000, a number that will exceed the record made in 2006. Additionally, the prices of homes in the Netherlands has risen between 5–6 percent, according to data from Statistics Netherlands (CBS). Homes in the Netherlands sold for an approximate average of EUR 250,000, up 7 percent from the prior year.
A few factors have contributed to the upturn in the Dutch property market:
Confidence in the market:
Confidence levels in the Dutch housing market reached record highs in in 2016: the Dutch Homeowners Association (Vereniging Eigen Huis, VEH) reported in its Market Indicator that consumer confidence had reached 121 in both August and September 2016. This confidence is bolstered by low mortgage rates, which has, in turn, increased the sales of Dutch homes.
Low mortgage rates:
Mortgage rates hit lows in 2016, and continued to fall throughout the year thanks to measures imposed by the European Central Bank (ECB), including the reduction of official interest rates and the introduction of a debt purchase programme. In addition, banks were pressured to lower mortgage rates and loosen acceptance criteria for mortgages in the Netherlands to compete with other lenders. Interest rates for 10-year or more fixed mortgages averaged less than 3 percent, and variable rates dipped to around 2 percent.
Expats and other Dutch residents have seen higher disposable income related to lower unemployment rates and wage increases that have outpaced inflation.
The housing market has seen a shortage of Dutch homes for sale — from the second quarter of 2016 to the third, the number of Dutch homes for sale fell from 144,000 to 136,000. As a result, potential homeowners are buying faster.
There is even more of a shortage in Amsterdam, with only 2,000 homes for sale as of early December 2016; a normal market would see at least 7,000 for sale. Government officials in Amsterdam have recently encouraged those searching for a home in the Dutch capital to look in other neighbourhoods, as house prices in Amsterdam have risen astronomically in comparison to elsewhere: prices in the first quarter of the year, for example, rose 21 percent.
Dutch housing market in 2017
Forecasts for the housing market in the Netherlands have been fairly positive, with some reports estimating that Dutch house prices will continue to increase another 5 percent. However, with higher house prices and a continuing shortage of homes, potential homebuyers may find it difficult to find Dutch homes to purchase — this could reduce the number of overall home sales for the Dutch housing marketin 2017.
The ESRB issued a warning in late November 2016 that the Dutch housing market faced some vulnerabilities related to high levels of debt within households and low mortgage collateralisation. Young people in particular tend to have mortgages greater than the value of their homes in the Netherlands.
However, the Dutch Ministry of Finance responded with a list of various measures the government plans to implement or has already implemented to decrease household debt, including reducing mortgage interest deductibility. Laws regarding mortgage lending standards have also been gradually introduced, such as reducing loan-to-value (LTV) limits and debt-service-to-income (DSTI) limits. LTV limits were reduced to 106 percent in 2013, and will be further reduced to 101 percent in 2017 and 100 percent in 2018.
Because these reforms are gradual, Dutch Minister of Finance Jeroen Dijsselbloem said in his response that they will “continue to contribute to a more moderate growth of household indebtedness.”
The future of the Dutch housing market
Other economic factors may have unforeseen consequences on the Dutch housing market. The unexpected Brexit vote has encouraged rumours that Amsterdam would be the new home for European headquarters, with companies looking to relocate or establish a new home in the Netherlands; the already crowded housing market may see even higher contributions from foreign investors. Though there are many unknowns, the Dutch housing market has seen strong growth — and it continues to thrive.