Housing Market Monitor – Off to a great start

by: Philip Bokeloh

150409-Housing-Market-Monitor-April2.pdf ()
  • The Dutch housing market got off to a flying start in 2015 with transaction volumes and prices continuing to rise.
  • Falling mortgage interest rates and the economic recovery are both major impulses for the housing market.
  • The new-build market is also picking up. The number of issued permits indicates a further improvement.

The housing market got off to a stronger start than we expected in 2015. There were more transactions than foreseen. We expected the limitation of the gift tax exemption in 2015 to have a dampening effect on the number of transactions, partly because of transactions being brought forward to 2014. But the moderating effect has been much less marked than anticipated. One possible explanation is that the sales boom in December is still having a knock-on effect: the sellers at the end of the year are now entering the market themselves.

Prices are also rising faster than predicted. In December we made a slight downward revision to the estimates in response to the stricter Nibud loan to income criteria. But here too, the moderating effect has so far been less pronounced than expected. This may be because more people are taking out mortgages with longer fixed-rate periods. The Nibud’s restrictions are less stringent in this case, so that buyers can borrow a larger mortgage than if they had opted for a mortgage with a short fixed-rate period.

However, as we only have the data for the first two months, we think it is too early to revise our estimates upwards. The stabilisation of the confidence indicator of the Homeowners’ Association (VEH) after two years of increases also suggests that caution is in order.

That said, there is still a good chance that we may have to revise up our housing market forecasts in the next publication. The housing market, after all, is benefiting from the economic revival, which is more powerful than initially thought. Another key factor is that interest rates are falling because of the actions of the ECB. These low interest rates are keeping houses affordable. The influence of interest rates on housing costs can be seen in the Calcasa affordability indicator, which sets off net housing costs against net income. Significantly, this indicator is continuing to improve despite the fact that house prices are rising again.