ABN AMRO: no drop in home sales until 2018

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Home for sale sign

The number of homes sold will continue to rise in 2017. However, at 5 percent this year’s increase will be significantly less than last year’s 20 percent. Group Economics at ABN AMRO expects 2018 home sales to drop by 5 percent relative to 2017. These findings are presented in this year’s first Housing Market Monitor. The bank’s economists believe that in 2017 prices will continue to increase at the same rate of 5 percent as in 2016; in 2018, however, they predict that prices will climb more slowly (by 3 percent).

The home sales volume reached a new record in 2016, and the housing market is likely to continue performing well for some years. Economist Philip Bokeloh of Group Economics at ABN AMRO explains, ‘We expect that volumes and prices on the housing market will continue to rise in 2017. However, the scarcity of homes for sale will depress the increase in sales volume. Another factor is that mortgage interest is starting to rise a little and houses are becoming less affordable as a result. The higher prices and stricter mortgage lending standards are also creating difficulties for first-time buyers. We expect that this will cause the volume of sales to drop slightly in 2018.’

Slowdown

Many homeowners have put off buying a new house in recent years. One reason for this was the issue of residual debt. With home values rising recently, however, they can now venture onto the market. Group Economics expects the recovery to continue in 2017, and believes that the proportion of existing homeowners looking to buy will increase further. Bokeloh adds, ‘In most provinces, though, the increase in sales volume is already levelling out. The main reason is that the demand for homes isn’t matched by the supply: it’s becoming more and more difficult for prospective buyers to find a home that suits their preferences. This is slowing down the growth in sales volume.’

Price increase to level out in 2018

Group Economics believes that prices will continue to rise at the same high rate in 2017, boosted by the scarcity of homes for sale. Given the shortage of new development, available homes will become even scarcer and house prices will rise. Nevertheless, Bokeloh believes that prices will not continue to go up forever. ‘The higher the interest rates become, the more difficult it will be to buy a house. Mortgage lending standards are stricter now than they were a few years ago. This didn’t affect prices much while interest rates were falling, but the situation is different when the interest goes up. We predict a smaller price increase for 2018,’ the economist explains.

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