As we are in Q2 now, let's review how the housing market did in Q1 2024. What's happening in the housing market now, and what can we expect soon? We overview the latest updates and insights from leading banks in the Netherlands.
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The prospects for the 2024 housing market are significantly brighter, offering a more positive outlook compared to 2023.
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With fewer homes for sale, increased buyer interest is driving up competition. This leads to more homes being sold above their asking price, increasing the average sales price.
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Transactions are increasing, notably in the first two months of this year compared to last year.
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The expansion of the starter exemption and the rise in the NHG cost limit are contributing factors.
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Additionally, there's a slight increase in the sale of new-build homes, temporarily improving traffic flow in existing home sales.
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Dutch housing market pessimism is diminishing as the Vereniging Eigen Huis market indicator rose to 85 in January from a low of 72 last June. Improved economic outlook, personal finances, and better interest rate prospects boost confidence.
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Transactions are gradually rising, driven primarily by increased apartment purchases. In January and February last year, transactions were up by 13% compared to the previous year's period.
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Many people hesitate to move forward because finding a good home is hard. There are few existing homes for sale, and while more new homes are available, they still need to be expanded. Buyers are holding back because new homes are often more expensive than existing ones.
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Transactions by first-time buyers remain stable. They often have urgent needs like moving out, starting a family, or changing jobs, making them less sensitive to economic changes than existing homeowners.
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Since energy prices soared, buyers pay closer attention to the energy label when buying a home.
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First-time buyers face less competition from investors buying homes to rent out due to rising interest rates, which makes rentals less appealing. Government measures like increased taxes and rental price restrictions discourage investors from buying residential properties.
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Buyers are more inclined to purchase homes due to anticipated reductions in mortgage interest rates. Expectations of euro zone inflation easing towards the 2% target level signal confidence in the European Central Bank's ability to lower its official interest rates. This is expected to decrease the deposit rate from 4% to 2.75% by the end of this year and 1.5% by the end of next year, consequently lowering interest rates for mortgages with short fixed periods.
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House prices are rising fast because buyers can borrow more, and fewer homes are available.
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Rabobank expects housing prices to go up by 6.2% this year and 6.3% next year.
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Due to the limited housing supply, we anticipate fewer transactions of existing owner-occupied homes: approximately 185,000 this year and 183,000 next year.
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Supply is decreasing because fewer building permits are being issued, leading to a decline in housing construction.
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Rabobank expects the economy to remain steady over the next two years, with consistent growth predicted for this year and the next, following a brief recession in the first three quarters of 2023.
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Last year, about 182,000 existing homes were sold, down from an average of around 218,000 annually in the previous five years. We anticipate a similar trend for the next two years, with around 185,000 sales in 2024 and 183,000 in 2025. This decline is because fewer homes are available for sale, not because of reduced demand.
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The recent rise in prices is mainly due to higher wages and more competition in the housing market.
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Increased wages directly affect how affordable a home is and how much someone can borrow. With higher wages, homes become more affordable, encouraging buyers to offer more for a house. A higher gross salary also influences the maximum mortgage amount that can be obtained.
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House prices are expected to increase significantly next year. ING Research predicts a rise between 5% and 8% by the end of 2024 compared to last year. This increase will compensate for previous declines and exceed the peak in July 2022.
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ING expect fewer investors to be active this year, with more selling their homes. This trend, observed in recent years and projected to continue in 2024, according to Land Registry research, is partly due to the announcement of the mid-rental regulation. This regulation pressures expected rental property returns, making home retention less attractive. As a result, the housing supply may increase slightly, dampening the upward pressure on house prices.
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Predicting the future is challenging, as unexpected events, such as rapid increases in energy prices, can occur. That's why ING offers two possible scenarios.
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In a "more positive" scenario, factors like a significant wage increase, lower interest rates, stable unemployment rates, and improved sentiment could result in higher house prices.
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In a "more negative" scenario, factors like a smaller wage increase, increasing interest rates, a significant rise in unemployment, and deteriorating sentiment could result in lower house prices.
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The Dutch House of Representatives has passed the Affordable Rent Act, aiming to lower rental expenses by an average of EUR 190 per month for about 300,000 properties. However, landlords might opt to sell their properties instead of adhering to the rent cap, leading to a decrease in rental options and worsening conditions for tenants who cannot afford or prefer not to purchase a home.
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The Dutch housing market still faces a significant shortage despite the government's aim to build 900,000 new homes between 2022 and 2030. However, the number of building permits issued has been declining.
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According to recent DNB research, most Dutch homeowners have the financial means to invest in sustainability upgrades for their homes. However, concerns about return on investment and limited awareness of available subsidies hinder widespread adoption.
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