Dutch home sales prices could shoot up by 8 percent this year, warns ING

Home prices in the Netherlands will increase by between 5 and 8 percent this year, according to ING. By the end of 2024, owner-occupied homes will, on average, be well above the previous peak in July 2022, the bank said.

“The fact that prices have recently risen sharply is mainly due to strong wage increases and the growing shortages in the housing market,” economist Sander Burgers said. Those benefiting from higher wages can spend more on a down payment and borrow more for a mortgage. That will lead buyers to offer more money for a home than before.

Wages were 6.9 percent higher in the last quarter of 2023 than a year earlier. ING expects wages to increase further this year, though not as much as last year. On Thursday, the Netherlands Bureau for Economic Policy Analysis (CPB) forecast that collective bargaining wages will rise 6 percent this year, and per-hour wages in the private sector will grow 6.3 percent.

According to ING, wage development is having a stronger effect on home prices than it previously assumed. “The wage increase is having a significant impact on house prices,” Burgers said. “A wage increase is nice in principle, but it is expected to translate into a price increase quite quickly.

Mortgage interest rates are also lower than ING previously anticipated, meaning that people can borrow more and, therefore, offer more. That, combined with the housing shortage, resulted in buyers increasingly overbidding to guarantee their chance at a home. ING expects that the interest rate drop will continue this year.

At the same time, the divide between demand and the supply of homes has grown. Fewer homes were built, and the demand for housing increased steadily due to the growth in the number of households. This has led homes to sell faster, driving buyers to bid over the asking price more often. “All in all, buyers have more room to make an offer this year when purchasing their desired home,” Burgers said.

“At the same time, we expect investors to be less active this year and to sell their homes on balance.” An important reason for this is plans to regulate mid-market rents, making rental properties less profitable. “This development will provide a slightly wider supply of housing and somewhat dampen the upward force in house prices.”

Home prices in the Netherlands reached an all-time high in July 2022. After a slight decline of almost a year, home prices have been climbing again since June 2023. In December, they rose year-on-year for the first time since the decline, and that trend continued in January, Statistics Netherlands reported this week. The average home cost 433,000 euros in January, 1.8 percent more than a year earlier and 1.2 percent more than in December.