ING expects home prices to climb by up to 9% this year; 4% increase in 2025

ING has upped its forecast for home price increases in the Netherlands. The bank now expects home prices to rise by between 7 and 9 percent this year and by another 4 percent in 2025. “Higher wages, lower interest rates, improved sentiment, and the continued shortage contribute to further house price increases,” the bank said on Wednesday.

After a year of price decreases, Dutch home prices have been rising again since June last year and have since topped the previous peak in mid-2022. Last week, ING reported that home prices increased 13.6 percent in the second quarter to a record 468,000 euros on average. According to ING, the recent price increases are mainly due to strong wage increases, lower mortgage interest rates, and the growing shortage in the housing market.

Higher wages directly impact whether someone can afford a home and how much they can borrow for a mortgage. “Wage increases are currently high due to the tight labor market and lost purchasing power during the inflation wave,” ING said. In May 2024, collective bargaining wages were almost 7 percent higher than a year earlier. ING expected the wage growth to decline this year, but it is happening less rapidly than assumed. “The expected higher wage growth will contribute to a stronger price increase in the housing market than we previously assumed.”

At the same time, mortgage interest rates fell and are now lower than at the end of last year. Lower interest rates also contribute to home affordability and higher borrowing capacity.

The Dutch housing market is also very tight, with a growing housing shortage. The NVM previously reported that potential buyers had, on average, 2.3 homes to choose from in the first quarter of this year. This, combined with buyers having more to spend due to wage increases and lower interest rates, has resulted in more overbidding and most homes now being sold above the asking price.

The confidence in the housing market has also improved and is more positive than ING expected. The market indicator of the homeowners’ association VEH stood at 90 in June this year, compared to 74 a year ago. 100 indicates a neutral mood. ”Due to increased confidence in the housing market, buyers will be more willing to offer more for a home,” the bank explained.

At the same time, ING expects investors to be less active next year and to continue selling their rental homes due to a combination of new government regulations, including rent regulation in the middle segment and a ban on temporary rental contracts. “This development will provide a slightly wider supply of housing and somewhat dampen the upward force in house prices.”

But it won’t make much of a difference. “All in all, we expect a significant house price increase this year. We also expect house prices to rise next year, but at a slower pace,” ING said.