Sale of newly constructed homes falls by half; Housing minister concerned

Sales of new construction homes fell by half in the last quarter of 2022 compared to a year earlier, Statistics Netherlands (CBS) said this week. This is the largest decrease since the statistics office started tracking the figure in 2015.

The number of transactions for new-build homes fell at an increasingly rapid rate over the course of 2022. In October, November and December, for example, Statistics Netherlands counted just over 5,300 new-build homes sold. That is almost 51 percent lower than in the fourth quarter of 2021.

The cause of the trend is likely due to the limited growth of new homes placed on the market, said CBS Chief Economist Peter Hein van Mulligen. He pointed out that in the figures for new construction, purchase contracts are normally signed at many different stages. “Some people buy a house when the ground isn’t even ripe yet.”

But the problem is that far too few new homes have been built recently. Dutch municipalities also issued permits for the construction of new homes less frequently last year.

“I am most concerned about the dip we are facing. We will really have to build through that dip,” said Housing Minister Hugo de Jonge on Thursday after the weekly Cabinet meeting. He said the problem is not only rising interest rates, but also that housing prices have not yet fallen enough.

Real estate association NVM reported an 8 percent fall in average sales prices of existing homes during the first quarter of 2023, and a near doubling in the number of properties on the market.

The minister thinks the asking price for new-build homes should be reduced, because buyers are hesitant amid the high interest rates. As a result, new construction projects are at a standstill. The current interest rate “is not crazy,” but it rose quickly in a short period of time. “Then you get an interest rate shock: both buyers and investors sit on their hands.”

The EIB, an economic institute focused on the construction sector, said in January it expects fewer homes to be completed this year and next year, probably averaging about 70,000 per year. This is partly due to a shortage of civil servants to process building permit applications. The increased costs of building materials and higher interest rates also will play a role, as does a shortage of suitable building locations.

Construction needs to increase rapidly in the coming years, because “the large housing shortage will not simply decrease.” De Jonge wants 900,000 new homes to be built by 2030. However, he would not commit to offering a construction guarantee or start-up subsidy, like builders and realtors have requested. With such guarantees and subsidies, construction can begin if 50 percent of homes in a project have been sold, instead of 70 percent as is now customary.

“You cannot solve this with money from the government alone. A correction must be made to the price,” De Jonge said. He did commit to further examining the problem.

The figures from Statistics Netherlands are calculated differently from those provided by the NVM. The CBS only processes home sale data when notaries register the transaction with the Land Registry. The NVM figures are more incomplete, but are based on the moment the purchase contract is signed. That is an earlier date, meaning the NVM is able to identify certain trends earlier.

Van Mulligen also indicated that the housing market as a whole has cooled down recently. This is mainly due to rising mortgage interest rates, which means that many people have a lower maximum amount they can borrow for their mortgage. This development also affects the sale of new homes. According to the economist, the nitrogen emissions problem is also an obstacle to new construction.