ABN Amro expects home prices to rise 7.5% by end next year

ABN Amro has adjusted its expectations for house price increases this year upwards, from 2.5 percent to 4 percent. That is partly due to higher wages, falling mortgage rates, and the increasing shortage of the housing supply, say economists at the bank. In 2025, home prices will climb another 3.5 percent, the bank expects.

Home prices have been rising again since the summer of last year. In addition to the improved affordability of homes, due to higher wages and falling mortgage rates, there were far fewer homes for sale in the previous quarter compared to the fourth quarter of 2022. Buyers have less choice, and overbidding on a home is more common. There are also more and more single-person households, which further increases the shortage in the housing market, according to ANB Amro.

The number of home sales is still under pressure, although the sharpest decline in transactions appears to be behind us, ABN Amro said. “Due to price developments and interest rate declines, homeowners who want to move on to another home are more willing to buy a new home before selling their old home,” the bank explained. The average time it takes to sell a house has been declining for three quarters in a row.

Last year, fewer mortgages were granted in total due to the decline in home sales and increased mortgage interest rates. But in the last quarter of 2023, the number of mortgage applications rose again for the first time since the beginning of 2022. The bank believes this could be a harbinger for the coming year.

The share of mortgage applications from first-time buyers rose particularly sharply, and their position in the housing market is improving, said housing market economist Bram Vendel. “In addition, if the gift exemption is abolished, first-time buyers can still use a family mortgage,” he noted. About one in six households in the Netherlands now uses a family mortgage, said the ABN Amro economist.