Dutch housing prices to fall by more than 6 percent in two years, says DNB

The housing prices will not only go down in the next year but most likely also the year after. In a new report, the Dutch Central Bank (DNB) said it expects home sale prices will fall by more than 6 percent in two years, even though the cost of living in general will become more expensive.

According to the estimate, the average price will drop by over 3 percent each of the next two years. This means a significant adjustment in the DNB’s expectations. Their last analysis in June predicted that the price of housing would continue to rise. The economists elsewhere, for example at Rabobank and ING, had also not counting on a price drop until their most recent estimates.

The biggest reason for the price drop is the increase in the mortgage interest rate. Over the year, the rate has increased by about 3 percent. Due to this, people are more restricted in the amount of money they can borrow to purchase a home. The DNB had not predicted that the mortgage interest would rise this much half a year ago. There is also less money leftover for many people to acquire a new home due to the high energy costs.

The prediction has been given with more caution than usual. This is because the housing market seems to be at a turning point at this time. According to the DNB, the sentiment can change quickly, and prices can temporarily rise or fall more substantially than anticipated.

DNB head economist Olaf Sleijpen does not see much reason for concern in the new prognosis. The housing market cooling off after years of price increases is “certainly desirable,” according to him. The DNB also thinks there will not be as many households that will be unable to pay their mortgage as there were after the financial crisis more than a decade ago.

The Netherlands still has a significant housing shortage. The closing of that gap could go slower than hoped, according to Sleijpen. Due to a combination of uncertainty around the housing market, higher interest rates, and rising construction costs, it is now harder to get building projects off the ground. DNB thinks that investments in new housing will be put under pressure.

Also, according to the DNB, the recent verdict by the Council of State about the building exemption for nitrogen emissions is expected to cause a decrease in the number of building permits in the next few years. Last month the court decided that building projects would not automatically receive permission to emit nitrogen on a temporary basis. Due to this verdict, many construction plans are at risk of being delayed.