House prices rise 19% but stabilizing; Confidence in market plummeting

House prices in the Netherlands are still rising fast, but the pace slowed down somewhat in May, Statistics Netherlands (CBS) and the Land Registry reported. Existing owner-occupied homes were 18.8 percent more expensive than in the same month last year. Netherlands residents are quickly losing confidence in the housing market, mainly because they expect mortgage interest rarest to rise further, ING concluded from a survey.

In April, home prices increased 19.7 percent on an annual basis. So the price increases are rising less quickly. In January, price increases peaked at 21 percent, the highest level in a decade. According to CBS, house prices almost doubled in nine years, rising over 98 percent since bottoming out in June 2013.

The strong price increases are partly due to the limited supply. The government intends to significantly increase housing construction in the coming years. According to experts, low mortgage rates also contributed to the madness in the housing market, making it easy for people to borrow more to buy a house. Mortgage rates have been rising rapidly in recent months now that central banks are making borrowing more expensive.

According to ING, the rising mortgage interest rates are dampening homeowners' and potential homeowners’ confidence in the housing market. Also, compared to previous periods, fewer people are convinced that house prices will continue to rise.

Wim Flikweert, Mortgage Manager at ING, called the development of mortgage interest rates and housing market prices the leading causes for the declining confidence. In addition, 62 percent of the over 1,200 respondents are concerned about the global economy due to the war in Ukraine, rapidly rising prices, and uncertainty about energy supplies. Over 80 percent said the high inflation affects their daily lives. 

The housing index compiled by ING fell from 107 to 98 in the second quarter, bringing that figure below 100 for the first time in a year and a half. That indicates a predominantly negative sentiment. 

Still, the cooling in the housing market is not bad news for everyone, said Flikweert. First-time buyers will benefit from the fact that significant overbidding will no longer be standard practice. “People who are on the fence about buying see a kind of turnaround. They have the idea that they get more op opportunities. We also get signals that the real madness is weakening somewhat.”

The Land Registry registered 15,749 residential transactions in May, compared to nearly 16,000 in April. Over 75,000 homes changed hands in the first five months of this year, which is a quarter less than in the same period last year. At the beginning of 2021, home buyers under the age of 35 were temporarily exempted from the transfer tax, which meant that more homes were sold.