Gov't aid to first time buyers could push house prices higher: DNB

A plan to let municipalities help first-time homebuyers financially may have adverse effects, De Nederlandsche Bank warned. This and other measures focused on starters in the housing market could drive home prices up even further, the Dutch central bank and other economists said to AD.

The Dutch housing market is overheated, with more demand than supply of affordable homes and home prices continuously climbing. As a result, first-time buyers, in particular, have a hard time finding a home in their price range that meets their needs. The government is therefore helping them in various ways.

But according to the DNB, the government should invest less in financing homes because it drives house prices up higher. The aid also only helps a small group in the housing market and disadvantages others, economists said to the newspaper.

"All the extra money currently going into the housing market actually flows to landowners," economist and housing market expert Frans Schilder of the Netherlands Environmental Assessment Agency (PBL) said to AD. "It is unwise to further inflate demand and borrowing capacity. I understand that municipalities want to help starters, but subsidies are not sustainable in the long term."