Housing Market Monitor – Ongoing recovery: forecasts revised up

by: Philip Bokeloh

150629-Housing-Market-Monitor-June.pdf (404 KB)
  • Stronger-than-expected housing market recovery driven by economic revival and low mortgage rates.
  • Improved bargaining position boosts seller confidence. After five years of decline, asking prices are rising again.
  • 2015 price forecast raised from 1% to 3%. 10% increase in transactions instead of stabilisation at 2014 level.


What are the forecasts for the housing market?

The recovery in the housing market this year has so far exceeded our expectations. Both the number of transactions and the prices have risen faster than thought. One important reason for the robust housing market recovery is the low mortgage rates. Another is that the economy is doing even better than anticipated. The strengthening jobs market and the faster growth of disposable incomes are having a favourable knock-on effect on the housing market. Confidence is running high. Potential buyers who initially postponed their home purchase are now eager to make a move.

On top of this, the effects of the lower gift tax exemption have proved to be less detrimental than feared. The widespread media attention last year has given the scheme a higher profile. Though we have no information about the number of gifts this year, our impression is that the gift tax scheme now enjoys a higher take-up than in the past, even though the temporary increase in the maximum exempt amount has ended. In addition, the dampening effect of the tighter income criteria also seems to be less strong than expected. However, it is still too early for a definite conclusion, as banks will not start applying the new Nibud criteria in full until 1 July.

The above justifies an adjustment of our forecasts. We are raising both the estimate of the number of transactions and that of the price development. The transaction volume will rise by 10% rather than stabilise this year. House prices will appreciate 3%, as opposed to our previous estimated increase of 1%. The revised forecasts for 2015 also compel a revision of the 2016 forecasts. Previously, we estimated a sales increase of 10% for 2016. However, as a large part of this growth will already take place this year, we are now counting on a rise of only 5% in 2016. Our estimate for the price development in 2016 has been raised from 2% to 3%.