Home prices to drop 2.5% next year: ABN Amro

Home prices will fall 2.5 percent next year, ABN Amro economists predicted in a report on the housing market. A decline in purchasing power, higher mortgage rates, and the economic downturn are behind this development.

The bank previously assumed an increase of 2.5 percent for next year. “A reversal is visible in the housing market. The number of home purchases is falling, there are more homes for sale, and everything indicates that, after years of unprecedented price increases, house prices will fall next year,” ABN Amro wrote.

Market experts predict that house prices in the four large cities will come under more pressure than elsewhere. Although house prices will fall slightly nationally, the number of housing transactions will hardly decrease in 2023. ABN Amro expects only 1 percent fewer homes to change hands than this year.

The bank also believes that the price drop will have limited consequences for the economy for the time being. That is partly because the mortgage interest rate won’t rise further than the current level, according to ABN Amro. “The increased housing requirements due to working from home, the persistent housing shortage, and the tight labor market also provide a counterbalance to falling house prices,” the economists said.

Homeowners also have little trouble with the interest rate hike because most have fixed their mortgage interest for a longer period. “In addition, due to the sharp rise in house prices, most homeowners have built up a lot of equity in recent years. In combination with government support to keep energy costs manageable, many families are more resilient than during the credit crisis,” the bank said

During the credit crisis, which spanned from 2008 to 2013, house prices plummeted, and many homeowners found themselves in financial trouble. ABN Amro now expects that fewer homeowners will be left with residual debt due to the falling home prices.

Rabobank reported last month that home prices would fall slightly in the course of next year, but for the whole of 2023, the bank still assumes a price increase of 3 percent.