Housing Market Monitor – Sales soar to record highs

by: Philip Bokeloh

  • Transaction volume estimated to rise by 20% to around 214,000
  • Tightening housing supply puts brake on further sales increase
  • Price forecasts for 2016 and 2017 raised to 5%
161011-Housing-Market-Monitor-October-1.pdf (185 KB)

The Dutch housing market continues to produce positive surprises. In August, the transaction volume was a quarter higher than in the same month last year. House prices rose by no less than 6%, the strongest advance in 14 years’ time.

The sustained upturn in the housing market is primarily attributable to the current mortgage interest rates. These are falling relentlessly, mainly because of the monetary policy of the European Central Bank (ECB). Another cause is the brightening economic climate. The economy is growing and the labour market is firming up. Added to this, the Brexit fallout has so far been less severe than feared. All this is bolstering the confidence of prospective home buyers. Pent-up demand is yet another factor. After years of delaying their home purchase, a growing group of buyers are taking the plunge. Moreover, steep rent increases in recent years have heightened interest in owner-occupancy. A majority of households now prefer buying to renting. A final aspect is that relatively few new homes are being built. Capacity problems at developers and local authorities are contributing to the tightness in the housing market.

This combination of factors has prompted us to raise our forecasts once again. Contrary to our earlier projection, prices will not rise by 4% this year, but by 5%. As the strong price appreciation this year will push up the average price for 2017, we are also raising our forecast for 2017 from 3% to 5%. In addition, we think that sales will accelerate even more this year than previously foreseen, i.e. by 20% instead of 15%. Sales will thus hit a record level. The pace of sales will slow in 2017, partly due to growing scarcity of suitable properties.