Low interest rates give the housing market another boost

Press release -

Home sales are surging, driven by the low mortgage interest rates. Where ABN AMRO’s analysts had previously predicted a five percent drop, they now expect home sales to stabilise as low mortgage costs make buying more affordable. At the same time, house prices continue to rise as available homes remain in short supply.

Further uncertainties are caused by the Dutch Council of State’s Nitrogen Decision, and how it will impact residential construction. “On Budget Day, the Dutch government promised to earmark funds for new residential construction. Whether those funds will be enough to achieve the target of 75,000 homes per year remains to be seen, however,” comments ABN AMRO economist Philip Bokeloh. “If the Nitrogen Decision causes residential construction to fall behind, this will put significantly more pressure on ownership turnover and reduce the number of transactions. Another factor is that the growing shortage could cause house prices to increase more than currently foreseen.”

Regional differences

Differences across the country’s various regions remain significant. The average home in the province of Groningen, priced at EUR 213,000, is substantially cheaper than a home in Noord-Holland, where the average purchase price is EUR 388,000. The reason why prices have risen more in the Randstad metropolitan area lies chiefly in the continued steep price increases in the region’s cities. However, differences in price increases across the country are diminishing: notably, the rate of increase in Amsterdam has even dropped below the national average.

Ongoing shortages

Overall, the housing market faces persistent shortages. The supply of available homes continues to diminish, albeit at a slower rate than previously. Much of the available supply consists of homes in the higher price segment. In August, the average asking price was EUR 418,000. The market offers single buyers with an average income very few homes to choose from. Solving this problem requires new development, which is currently slow to emerge. Following the Council of State’s Nitrogen Decision in May, construction projects now face the possibility of further delays, or even cancellation. It remains uncertain whether the measures to boost residential construction, announced by the Dutch cabinet on Budget Day, will have the desired effect.

Further information

The full text of ABN AMRO’s housing market monitor is available at https://www.abnamro.nl/nl/prive/hypotheken/actueel/huizenmarkt/woningmarktmonitor-oktober-2019.html

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