Housing market

Falling through the cracks

Lots of things go well in our housing market. For example, we have good quality homes in the Netherlands. And compared to other countries, only few people have trouble making ends meet.

But in some respects, there is room for improvement. Some groups have trouble finding a house. First-timer buyers are perhaps the most important example. They are often not able to buy a home. Demand for homes far outweighs supply, and after first-time buyers have viewed the home they wish to buy, they are often outbid by people who are able to offer more money, using the excess value of their current property for example. If the first-time buyers do manage to buy a property, they face high mortgage costs. First-time buyers often earn too much to qualify for rented social housing. That only leaves the private sector rented accommodation. But dwellings there are scarce. And those available often have high rents.

Housing shortage 

There are several reasons why some people have trouble obtaining a home. One of these is that we have a housing shortage in the Netherlands. There are simply more prospective buyers than there are homes. By mid-2020 the deficit was 331,000 homes. (source: Ministry of Interior and Kingdom Relations).

Many houses for sale, few rental accommodation

But also the type of housing in the Netherlands plays a role. In particular, there is a lack of affordable rental housing in the private sector. Only 9% of our housing stock consists of private sector accommodation. In Germany, for example, this is about 50%.

And yet, first-timer buyers would greatly benefit from a wide range of rental homes. Because it means they have an attractive alternative to buying a property. This way, they may also be able to save for a house of their own. So they don't have to get deeply into debt if they want to buy a house later on.

Read about the other benefits of a larger range of rental accommodation

Government encourages people to buy a house

The fact that there are so few rental homes in the Netherlands is not so strange. For decades, the government has been encouraging Dutch people to buy a home. Homeowners get all kinds of financial benefits. Examples are the mortgage interest relief and the relatively low tax on home ownership compared to other types of assets. There are no such arrangements for tenants. It is therefore not surprising that most Dutch people want a house of their own and that the number of rental homes is small.

Solutions

At De Nederlandsche Bank (DNB) we believe that various things should be done so that more Dutch people can find a suitable home:

• In the coming years, many new homes will have to be built. The government must take the lead in this, if necessary.
• It is important that a large part of these new homes consists of rental accommodation. Governments can ensure this happens, by for example including it in their zoning plans.
• In order to further stimulate the rental sector, the government must make renting as attractive as buying. To this end, it must gradually reduce the financial benefits for homeowners.

More borrowing is no solution for first-time buyers

Housing prices have risen sharply in recent years. Some people therefore feel that first-time buyers should be able to borrow more. We do not agree. Our researchers have found that housing prices have risen mainly in recent years because we were able to borrow more. So, if first-timer buyers are allowed to borrow more, house prices will only increase.

The fact that the government encourages Dutch people to buy a home also leads us to have high mortgage debts. Read about the risks of this on the mortgage debt page.