Housing Market Monitor – Housing market temperature soars

by: Philip Bokeloh

  • We have raised our transaction and price forecasts
  • House sales are benefiting from low interest rates and economic revival
  • Housing scarcity is driving prices ever higher
170706-Housing-Market-Monitor-July-1.pdf (833 KB)

The temperature will continue to soar in the housing market this summer. Driven by the economic recovery and low interest rates, sales hit an annualised record of 232,000 in May. Taking their cue from the large cities in the Randstad conurbation, other regions are now also moving into a higher gear. Some cities are already showing signs of overheating, with bids above the asking price no longer an exception. The average house price in the Netherlands posted a year-on-year increase of nearly 8% in May. If it continues rising at this rate, the peak of 2008 will soon be reached. The current average price is only 7.5% below that level. Scarcity is an important reason for the sharp price spike. During the crisis, new-build activity suffered a severe slump. Although construction is picking up, the number of house completions is still not keeping pace with the growing number of households, nor is this likely to happen any time soon. The persistent low mortgage rates are also fuelling prices. Earlier, we assumed that interest rates would edge higher in the course of the year. We still believe that they will, but now foresee a less powerful increase than previously thought. The strong results for the first five months combined with the lower interest rate outlook have prompted us to raise our price and transaction forecasts for 2017 and 2018.