Office, shop, home prices to decrease next year: ABN Amro

Real estate prices and values will decrease next year, due to the economic recession and rising unemployment caused by the coronavirus, according to economists at ABN Amro. They expect the value of offices, shops and homes to decrease between 4 and 7 percent next year, with retail buildings being hit the hardest, followed by offices and rental homes.

On average, real estate values will decrease by 6 percent next year, sector economist Madeline Buijs said in a report. According to her, real estate responds late to economic decline, resulting in price decreases only happening next year, when the Dutch economy is expected to grow again. For this year, ABN Amro still expects real estate values to increase by 1.5 percent.

Retail properties will be hit the hardest, ABN Amro expects, with values already decreasing by 4 percent this year and by 7 percent next year. Office buildings' values will increase 1 percent this year and decrease 6 percent next year. And home values will increase 3 percent this year and decrease 4 percent in 2021, the bank expects.

According to the bank, unemployment in particular will have an impact on the markets for office buildings and rental homes. The bank expects unemployment to increase to 7,2 percent next year - a more negative outlook than the 5.9 percent unemployment central planning office CPB expects, according to leaked Budget Day documents.

For rental homes, unemployment will affect households disposable income, which will result in consumers wanting to spend less on housing costs, the bank expects. The coronavirus crisis' effect on tourism is also putting pressure on home rental prices. Homes initially intended for tourist rentals are now entering the housing market, making more homes available.

ABN Amro also expects that the demand for office space will decrease, with more people working from home and the increasing unemployment. Due to social distancing, the demand for office space is still on par as fewer people can fit into an office while keeping 1.5 meters apart. But in the longer term, as social distancing measures are relaxed, fewer offices will be needed.

The bank suggests turning office spaces into homes to both prevent vacancy and reduce the housing shortage.