Rabobank: Amsterdam accounts for a quarter of house price rises in the Netherlands

National trends in house prices are being given a firm boost by the capital. Amsterdam now accounts for a quarter of house price rises in the Netherlands. Without this ‘Amsterdam effect’, average house prices in the country would have risen not by 4.4% but by 3.4% in the second quarter of this year compared to last year. House prices are expected to rise by an average of around 5% nationally throughout this and next year. The growth in the number of homes sold is levelling off. Between 200,000 and 220,000 homes are expected to change ownership in both 2016 and 2017. These are the views of researchers at Rabobank in the Dutch Housing Market Quarterly published today.

Prices rising strongly, but number of houses sold will stabilise
Next year too house prices are expected to continue to rise strongly, by an average of 5%. Housing market researcher Paul de Vries of Rabobank: ‘Low interest rates at present are making homes relatively affordable, so demand remains high. The growth in the economy is also being maintained and employment is rising, as a result of which more people are inclined to buy a house. New house building is not keeping pace and this is producing more shortages on the Dutch housing market, which in turn is expected to lead to higher prices. On the other hand, we see that the number of sales is levelling off slowly but surely, ultimately stabilising at around 210,000. As far as sales are concerned we will end up at the same level as around the turn of the century. Rising prices will however mean reduced affordability in the long term and higher total mortgage debt. This is a risk.’
Marked regional differences; increase Amsterdam spectacular
Although prices are currently rising in all provinces, there are marked regional differences. De Vries: ‘In Noord-Holland prices are rising much faster than, let’s say, Zeeland. This is of course a reflection above all of the spectacular house price rises in the capital. During the second quarter of 2016, year-on-year growth in house prices was 4.4% nationally, while in Amsterdam this figure was no less than 14.7%. Without Amsterdam, average house price rises nationally would not be 4.4% but 3.4%. Turnover on the market in Amsterdam for existing owner-occupied homes has grown over the last twenty years from EUR 280 million to EUR 4.3 billion a year. This is because both the number of homes sold and house prices have soared and so the share of the capital in the Dutch market as a whole has increased. This share has grown from 2% in 1996 to 9% in 2016, even though Amsterdam accounts for less than 3% of the stock of owner-occupied houses in the Netherlands.’
Owner-occupied houses scarce in the capital
Because of Amsterdam’s substantial share of the total Dutch market, the effect of housing market trends in the capital on average house price trends is substantial. De Vries: ‘This is not particularly obvious in periods when price rises in Amsterdam do not differ very much from national trends, as was the case before the crisis. Since 2014 however, we are seeing a very clear ‘Amsterdam effect’. The city is extremely popular among young adults, but at the same time there is a very limited supply of owner-occupied homes on the market. The fact that there are shortages in the market is nothing new, but lower house prices and low mortgage rates have given an extra boost to demand since 2013. The strong price rises in recent years are therefore a logical consequence. We expect the pressure on the housing market in Amsterdam to persist. The city remains popular and the number of owner-occupied homes is only rising very slowly. For house buyers, owner-occupied homes in Amsterdam will therefore remain scarce for the foreseeable future.’
The Dutch Housing Market Quarterly can be found at: www.rabobank.com/economics

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