Dutch home prices expected to rise 2.5% next year



The Dutch housing market has experienced a significant turnaround, with the price correction coming to an end at a higher level than expected.

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The Dutch housing market has experienced a significant turnaround, with the price correction coming to an end at a higher level than expected. ABN Amro, a prominent bank, has adjusted its price estimates accordingly, now projecting a 3% decrease in home prices for this year, rather than the previously estimated 5% decline.

Dutch home prices expected to rise 2.5% next year | ogusyis

Moreover, the bank anticipates a 2.5% increase in home prices next year, in contrast to the earlier projection of a 3% decrease.

Rising Prices After a Decline

Despite prevailing negative sentiment in the housing market, there is evidence of prices rebounding following a period of decline. While home prices still remain 4.3% lower than the peak observed in July 2022, the price index has shown a slight increase for the past four months.

Factors Contributing to the Market Recovery

ABN Amro attributes the end of the price correction to several key factors. These include a tight labor market, a significant housing shortage, sluggish new construction, and stabilizing mortgage rates. The bank emphasizes the need to build more energy-efficient homes and enhance the sustainability of existing housing stock, as homes with lower energy labels experienced more significant price declines and slower recoveries.

Impact on Housing Affordability

Housing affordability is characterized as moderate, with interest rate hikes initially worsening affordability. However, the subsequent price correction partially improved affordability, and accompanying wage increases further contributed to the positive trend. Nevertheless, this progress only mitigated part of the affordability deterioration caused by the interest rate hike.

Challenges in Housing Construction

Faltering housing construction is putting pressure on market transactions, according to ABN Amro. Political uncertainty, particularly surrounding outgoing Housing Minister Hugo de Jonge's plans to regulate a portion of the free sector rentals, has hindered new housing construction. Additionally, increased labor and material costs, higher interest rates, and limited availability of building lands also play a significant role in constraining construction activity.

Transaction Projections and Market Outlook

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Due to the lack of new homes, the housing market is experiencing a decrease in transaction volume, resulting in a stagnant market. ABN Amro maintains the estimation of a 5% decline in transactions for 2023 and a further 2.5% decline in 2024.

The Dutch housing market has seen a positive shift as the price correction concludes at a higher level than anticipated. The combination of a tight labor market, housing shortage, limited new construction, and stable mortgage rates has contributed to this recovery. However, challenges persist, such as the need for more energy-efficient homes and addressing political uncertainties surrounding regulations. The market's transaction volume remains under pressure due to the scarcity of new housing, impacting overall market activity.

Dutch home prices expected to rise 2.5% next year

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