Housing construction stalling under high costs; Potential buyers can't afford new homes

Large housing projects in the Netherlands are struggling to get off the ground. Many homes are too expensive to potential buyers due to higher interest rates and increased construction costs, causing entire projects to get scrapped. This year, half as many homes will be built as in previous years, AD reports.

Construction companies can usually only start building on a project when at least 70 percent of the homes have been sold. And getting those homes sold is a problem across the Netherlands, the Association of Dutch Project Development Companies (NEPROM) said to AD. Last year, 20,000 newly constructed homes were sold to private individuals, compared to 36,000 in 2021. Based on a recent survey, NEPROM expects that number to drop to 15,000 this year.

“A dramatic setback,” NEPROM chairman Jan Fokkema told AD. “It is difficult to get through this dip. Investors are hesitant due to the high interest rates, and mortgage interest rates have increased enormously for buyers.”

The government wants to build 900,000 homes by 2030 to fight the housing shortage, which grew to almost 315,000 homes last year. But that target seems increasingly challenging to achieve. Construction companies face a range of problems in addition to reluctant buyers, including the nitrogen crisis, the high construction costs and interest rates, and the long time it takes to get a permit.

Fokkema thinks the government can do more to help get housing construction projects off the ground. “For example, by promising to guarantee half of the homes. Then a project can start if 50 percent of the homes have been sold.”

Construction companies are also pessimistic about new construction projects. BAM built a quarter fewer homes last year, according to its annual report. VolkerWessels reported 5 percent less construction due to “licensing and current market conditions.” Van Wijnen struggled to sell more expensive apartments but expects to increase the number of affordable homes this year.

Peter Boelhouwer, professor of residential construction at TU Delft, recognizes the problem. “Mortgage rates have risen much faster than house prices have fallen. As a result, first-time buyers are having an increasingly difficult time, and people who would move on stay where they are. As a result, new construction projects are having a hard time,” he told AD.