The number of homes sold will reach record-breaking heights in 2016. ABN AMRO’s Group Economics department expects that the increase in sales this year will outperform the already ambitious predictions, reaching 20 percent rather than 15 percent. The bank’s economists also believe that house prices will rise by 5 percent in 2016, a more rapid increase than initially expected. During the first six months of 2016, they expected a price increase of 4 percent.
Group Economics believes that the increase in sales will stagnate in 2017, partly as suitable homes become increasingly scarce. Not expecting the number of sales to rise any further, the economists have lowered their growth forecast for the number of transactions from 5 percent to 0 percent. However, Group Economics has upped its estimate for the increase in house prices by 2 percentage points to 5 percent, owing largely to what is known as the spillover effect: the sharp rise in value in 2016 will force the average prices for 2017 up.
Good news and bad news
Philip Bokeloh, one of ABN AMRO’s economists, explains, ‘The higher prices are good news for homeowners whose mortgages are currently underwater. This group is steadily becoming smaller and smaller. The sharp rise in prices is not such good news for first-time buyers, however, who will have more difficulty finding affordable homes. Over time this will slow down the sales. In some towns and cities the shortage on the housing market is already at such proportions that it is becoming difficult for more and more buyers to find a suitable home. The shortage on the supply side is preventing the number of sales from increasing further. With this in mind, we have raised our forecast for this year to 20 percent while predicting stabilisation for 2017.’
Shortage on the housing market
Bokeloh points to a number of factors as reasons for the increasing shortage on the housing market. ‘Falling mortgage interest rates are still the most important explanation for the higher demand for homes. The economy is also expanding, which is boosting confidence among homebuyers. In addition, more and more people are now buying homes after having put off the decision for years, and the majority of households are choosing to buy instead of rent. Lastly, capacity issues at developers and local authorities – and the resulting lack of new development – are another cause of the shortage on the housing market.’
Existing homeowners looking to buy again
Prices are rising fastest in the middle and higher price segments: homes in these price categories are in greater and greater demand. One reason is that existing homeowners are looking to buy again, and they generally target more expensive homes than first-time buyers. Younger buyers also represent a smaller share in the purchases: the stricter mortgage rules mean that they have to save money before they can buy a house.