Home prices up 10.6 percent; Housing market overheated again

Dutch home prices are rising faster and faster. According to Statistics Netherlands (CBS) and the Land Registry, existing owner-occupied homes were, on average, 10.6 percent more expensive in July than a year earlier. That is the largest increase in almost two years. “The housing market seems to be overheating again,” said CBS chief economist Peter Hein van Mulligen.

Home prices had already risen sharply in June, with an increase of 9.7 percent on an annual basis. Compared to June, prices rose by another 1.4 percent in July. There is absolutely no longer any question of price decreases, which occurred a year ago.

Van Mulligen draws a comparison with 2021 when home prices also started to rise very sharply. But this situation is different, he warned. At that time, mortgage interest rates were very low. Now, borrowing costs are a lot higher.

According to the economist, the price increase is now mainly driven by rising wages, in combination with the still very tight supply of homes for sale. “It is a classic supply and demand story. There is enough money available, and the demand to move is high.”

Another striking development is that the number of homes changing hands rose by almost a quarter in July to 18.610 units. Van Mulligen recognizes this as an increase in confidence in the housing market. “People think: if I buy something, I’ll still be able to sell it later.” Van Mulligen added that the number of housing transactions a year ago was very low, so a solid increase was relatively easy to achieve.

In late 2021 and early 2022, price increases peaked at around 20 percent. Van Mulligen does not dare to say whether we are heading to such a scenario again. But he can’t rule it out, either.

If inflation continues the fall, the wage increases that unions and employers agree on will probably also decrease. But it also seems that the European Central Bank (ECB) will lower its interest rates again. Van Mulligen thinks that interest rates will not go down very quickly, but it does seem that borrowing costs will eventually decrease.