Four key elements for achieving a more balanced housing market
The overheated Dutch housing market has to contend with multifaceted and urgent issues.
Read moreYou are using an outdated browser. DNB.nl works best with:
The Dutch housing market faces serious problems. For example, house prices have risen sharply in recent years and first-time buyers find it increasingly difficult to buy a house. At De Nederlandsche Bank (DNB), we have identified several solutions to these and other problems in the housing market.
The Dutch housing market has been overheated for some time. Over the past five years, house prices have gone up by 8% on average. In November 2021, the average price of owner-occupied homes was 20.1% higher than a year earlier, which is the largest price increase since Statistics Netherlands (CBS) begun its measurements in 1995. This has made it very difficult for households to buy a house. If they manage to find one, they typically need to take on large debts to afford it.
Why does DNB involve itself with the housing market?
At DNB we are committed to safeguarding the stability of our financial system and our economy. The housing market has a major impact on both, and that is why we examine the subject and advise the government. We also take measures to ensure that banks are able to absorb shocks in the housing market.
Overheating in the Dutch housing market is caused by several factors:
Interest rates are at historic lows throughout the euro area, causing house prices to go up in other European countries as well. But tax incentives for homeowners and borrowing standards are more generous in the Netherlands than in other countries. This causes higher house prices in the Netherlands to be permanently higher.
Expected house price developments
We publish our projections for the Dutch economy every six months. They also discuss house prices. According to our latest projection, prices of owner-occupied homes are expected to rise by 11,3 % in 2022.
Price increases are not the only problem in our housing market. A related issue is the fact that mortgage indebtedness in the Netherlands is higher than in other countries. Similarly, households assume increasing risks when taking out a mortgage loan, borrowing large amounts in relation to the value of their new home and their income. These high mortgage debts make households financially vulnerable and reinforce fluctuations in the economy.
Another problem in the Dutch housing market is the inequality between buyers and tenants. People who own their homes benefit from all sorts of tax breaks that tenants do not. A household renting a home in the non-subsidised sector is much worse off financially than their neighbours who own their home.
At De Nederlandsche Bank (DNB), we have identified several solutions to tackle overheating and other problems in the Dutch housing market:
At DNB we are regularly asked why we do not raise interest rates to address the problems in the housing market. As we have seen above, the low interest rates are indeed one of the causes of overheating in the Dutch housing market. In recent years, interest rates have been depressed by the monetary policy of the European Central Bank (ECB). DNB also has a vote in determining this policy, but the interest rates are mainly caused by developments at the global level. For example, people tend to save more as a result of population ageing. In addition, monetary policy is geared towards the euro area as a whole. It is a European policy, which means we cannot apply it to solve the specific problems in the Dutch housing market.
The overheated Dutch housing market has to contend with multifaceted and urgent issues.
Read moreThe economic recovery continues at a robust pace, the search for yield continues and house prices keep going up. Against this backdrop, it is important not to lose sight of growing vulnerabilities and risks to financial stability.
Read moreOn 11 October 2021 Klaas Knot presented our six-monthly Financial Stabilty Report. You can read his introductory remarks here.
Read more