Dutch home prices will climb 7.5% this year, 5% next year: ABN Amro
Home prices in the Netherlands will climb 7.5 percent this year and 5 percent next year, ABN Amro said in its latest housing market forecast on Tuesday. The bank upped its estimate for this year (6 percent in the previous forecast) due to improving sentiment in the market. The bank also said that there is some extra uncertainty in the forecast, partly because the new Cabinet hasn’t elaborated on its plans for the housing market.
In the second quarter, the sentiment in the housing market improved for the third quarter in a row. “Falling mortgage rates and increased wages boosted confidence among home buyers,” ABN Amro said. “Home prices and transactions are rising faster than expected.”
The bank stressed that although confidence has increased, housing affordability is still an issue. The falling mortgage rates and higher wages are driving up home prices, which reached record levels in recent months, completely canceling out the price drop in 2023.
The number of housing transactions is increasing faster than expected. Nearly 78,000 existing homes changed ownership in the first five months of this year, 9,000 more than in the same period last year. “The increase is partly due to the higher National Mortgage Guarantee (NHG) limit and because private landlords are selling off properties,” ABN Amro said. First-time buyers are particularly benefiting from the higher NHG limit, because it increases their borrowing capacity. The lower interest rates and recovery of house prices also make it more interesting for homeowners to move on to their next owner-occupied home.
“However,” the bank noted, “the lack of new construction may slow down the growth in the number of transactions.” High land prices and a lack of capacity on the power grid contribute to this. “One bright spot is that more building permits have been issued. If this trend continues, the number of building permits this year could be a quarter higher than in 2023.”
The bank urged the new government to elaborate on its plans for the housing market. The new coalition’s main lines agreement states that they’re holding on to the previous government’s goal of building 100,000 homes a year. “But it is uncertain with which measures it wants to achieve this,” ABN Amro said.
According to the bank, it appears that the Schoof I Cabinet wants to link social housing rents to inflation from 2026 instead of its current link to collective bargaining agreement wages. “If inflation is expected to fall to 2 percent in the long term, it is likely that annual rent increases will also be lower. Although this is a relief for existing tenants, it puts pressure on the income of investors and corporations,” said ABN Amro economist Philip Bokeloh. That could mean fewer investments in new rental properties, making things more difficult for tenants in the long run.
“In addition, the main lines agreement does not contain any measures that help achieve the climate objectives of the built-up environment or help homes switch off gas,” Bokeloh said. “Cuts are being made to sustainability measures, the electrification of the housing stock is not a priority, and the government is not allocating extra money to solve the problem of the overcrowded electricity grid. This could be at the expense of the construction of new homes.”
