The housing market

After a brief period of decline, house prices are now rising again

Starting in July 2022, house prices fell for a year. This was due to a combination of rising mortgage rates and a deteriorated economic outlook.

The fall in prices ended in the summer of 2023, partly because interest rates did not increase further and incomes began to rise. Higher incomes mean people can borrow more to purchase a home. In addition, few new homes are being completed and the overall supply of housing remains very tight. As a result, house prices are rising; they are already well above the July 2022 peak.

House prices rise, interest rates decrease

First-time buyers find it hard to find a home

There are too few homes for everyone in the Netherlands and the number of homes for sale is in fact decreasing. Especially in the Randstad area, there is too little supply of owner-occupied houses. And housing is expensive for many people looking for a property, such as first-time buyers, low- and middle-income earners and single people. Interest rates started to rise in 2022, and this meant higher monthly payments for people taking out a mortgage. This has had a negative impact on housing affordability. Meanwhile, interest rates are no longer rising and average incomes are growing, but house prices are rising sharply again. As a result, it remains difficult for many first-time buyers to obtain finance for their property. Read more about the position of first-time buyers here (Dutch).

For most homeowners, monthly costs remain the same for now

Homeowners may face higher monthly costs when their fixed-interest period expires. While interest rates were still low, many households chose to fix the interest rate for a long time, more than 15 years on average, when taking out a new mortgage. That means there is a very large group for whom the rise in interest rates is less of a problem for the time being. But there is also a group that will have to deal with higher monthly costs. 

Too few homes are being built in the Netherlands

The number of new homes built has long lagged behind demand. The increased interest rates are making it more expensive to build, so fewer projects are getting off the ground. In addition, prices of construction materials have risen sharply, and building contractors are facing staff shortages. Tightened nitrogen regulations and other procedures are also putting additional pressure on newbuilds. It the Dutch housing market is to remain accessible, sufficient homes must be built in the coming years.

Fewer houses under water

Although house prices have been rising for over a year, any price drop always remains a risk for homeowners. If prices fall rapidly, the value of a house may at some point become lower than the mortgage debt on the property. The house is then “under water”. This is a problem when you want to sell your house: the proceeds from the sale will not be enough to pay off the mortgage and you will be left with a residual debt. A fall in house prices is always a risk for homeowners. In 2013, when the housing market crisis was at its worst, 3 in 10 houses were under water. The risk of a sharp fall in house prices is less now than it was at the time of the financial crisis, though. If prices had fallen by 20% in 2022, then 1 in 12 homeowners would have been left with residual debt when selling their home. In many cases, these are first-time buyers who have borrowed heavily to buy their homes. Having a home that is under water is not only problematic for homeowners, but also bad for the economy. This is because if your home is under water, you will generally have less money to spend, and that slows down the economy.

Expected house price developments

Every six months we publish our outlook for the economy, including for house price developments. House prices were 2.8% lower in 2023 than in 2022. DNB expects house prices to increase by 5.9% in 2024 and by 4.1% in 2025.

Solutions for the housing market

We have made a number of proposals to solve the problems in the Dutch housing market, and we list the most important ones below.

More newbuilds needed

In the coming years, many new homes will have to be built. and the central government should play a coordinating role in the process. In particular, more affordable rental housing in the non-subsidised sector is needed. This will offer an alternative to those entering the housing market and not yet able to buy, giving them the opportunity to save toward the purchase of a home in due course without having to take on huge debts.

Reduce tax benefits for homeowners

There is a big difference between buyers and renters. People who own their home often have much lower housing costs than people who rent in the private sector due to tax benefits. We advise the government to further phase out financial benefits for homeowners. For example, by moving home equity from Box 1 to Box 3 for income tax purposes, or by incrementally increasing the notional rental value of a property. The government could then use the resulting revenues to lower income tax, for example. Of course, these tax benefits should be phased out gradually, so homeowners do not suddenly face higher costs.

Tighten mortgage lending standards

In the Netherlands, we have high mortgage debts compared to other countries. Here, you can take out a mortgage up to 100% of the home's value. Moreover, the government makes it financially attractive to borrow money to buy a house. This means that many Dutch households have high mortgage debt, which makes them financially vulnerable. Indeed, if house prices fall sharply, homes may go under water. High mortgage debt also leads to high volatility in our economy. We recommend gradually reducing the maximum mortgage from 100% to 90% of the house price.

No measures that increase spending capacity

The government has taken several measures that allow first-time buyers in particular to make higher bids. Examples include the more widely available special loans and the abolition of transfer tax for first-time buyers. These measures are well-intentioned, but they actually lead to even higher house prices in the longer term. If you have more money to spend on a house, you can pay a higher price. And if more people do so, housing prices will rise further.