We can easily speak of an over-stretched dutch housing market. In a recent survey1 of Statistics Netherlands (CBS), it has been calculated that dutch housing prices have increased 91% since 2013. Now indications exist that the largest price increases are over. But that doesn’t make homes affordable right away. The CBS report describes the combination of causes that have led to the current overheated dutch housing market. And now the first municipalities are looking for creative solutions.
Causes of this overheated dutch housing market
Several reasons exist for the current situation in the housing market. And it is the combination of factors that has led to high prices, in combination with a low supply. A brief overview of the causes makes it clear that simple solutions do not exist.
Construction of houses
A common argument is that too few new homes have been built in recent years. It is a fact that housing corporations have produced few new homes. In addition, a shortage of affordable medium-sized homes exists. On the other hand, in the more expensive segment, sufficient houses were built. There seems to be an uneven balance between supply and demand.
It must be borne in mind that the ‘ordinary’ law of supply and demand does not apply to an overheated housing market. Normally, increasing demand leads to increasing supply. The housing market works differently. In an overheated housing market, scarcity leads to the situation that potential sellers will first buy themselves before they put their own house on sale. Like this, supply is lagging behind demand. And this causes increasing scarcity.
There exists another cause of the lagging offer of properties for sale. The government encourages older people to live at home longer. For example, different forms of home care are available. And there are ways to buy-in self-care at home. This policy is successful, but the consequence is that older people’s homes become available on the dutch housing market later.
Low interest rates
An important additional cause of the current overheated dutch housing market is the extremely low market interest rate. Borrowing money has never been so cheap. Interest rates have indeed doubled in recent months. As a result, buyers now spend more money monthly on paying their mortgage interest. For many homeowners, the monthly costs of the property consist mostly of the repayment of their mortgage. And now that interest rates have risen sharply in a short time, new homeowners are facing higher interest costs. This puts the affordability of housing even further under pressure. Nevertheless, historically, we can still speak of an extremely low interest rate.
The above list is limited to the major causes of the current overheated dutch housing market. Meanwhile, the government is looking for solutions. And not every solution is equally successful.
Initiatives to cool down the dutch housing market
In recent years, various attempts have been made to unblock the housing market. For example, the government initially reduced the transfer tax for starters to 2% of the purchase price. And since 2021 this tax for starters has even been completely abolished under certain conditions.
And in 2013 a generous gift tax exemption was invented. Up to €100,000 could be donated to starters tax-free. The idea behind it was to solve or prevent, houses that were financially flooded. And the hope existed that this ‘jubelton’ would result in starters borrowing less. In practice, it has become clear that starters preferred more expensive homes rather than a reduction of the mortgage. In the meantime, the decision has been taken to abolish this tax facility from 2024.
These are examples of less successful initiatives to deal with the overheated housing market.
But other plans seem to offer more chances of success.
Land of the municipality
For example, residents of the municipality of Westland can get help with the purchase of their homes. For this purpose, the municipality has set up a housing fund. The concept works as follows: the municipality buys the land on which the house stands. On average, that is about a third of the asking price of a house. A reduced interest rate will be charged on the amount the municipality contributes. It looks like a form of leasehold, but in practice, it should be more beneficial for the buyer.
When sold, a part of the revenues must be paid to the municipality.
It is an interesting development, in which always a risk of a price-raising effect exists.
The purchase of land as a solution to the stalled housing market. Have you become curious about your opportunities to invest in land? Then we would like to invite you to a completely free conversation with one of our advisers.
