Will 2018 be a pivot-point for the Dutch housing market?
From mid-2013, the Dutch owner-occupied housing market recovered at a rapid pace from the crisis in the five preceding years. The supply of existing and newly constructed owner-occupied homes, the number of transactions, and the number of newly concluded mortgages increased rapidly. In a relatively short period, purchase prices rose sharply. The year 2018, however, shows a decreasing growth or even a decline in the volume on the owner-occupied housing market and on the mortgage market.
On Thursday 7 February 2019, the 24th edition of the Housing Market Monitor (Monitor Koopwoningmarkt), covering the fourth quarter of 2018, was presented by the Housing Value Expertise Centre, part of the Faculty of Architecture and the Built Environment at the TU Delft. On the same day, the RTL Z channel presented the RTL Z Huizenindex (housing index) based on the Housing Market Monitor.
Housing market stagnation...
The shortage houses for sale, combined with the sharp rise in house prices, seems to be the reason behind the declining growth in the number of transactions. There is still a limited supply of owner-occupied houses in the existing housing stock, while the growth of newly built houses also seems for now to be stagnating. The dynamics that are typical of the Dutch housing market will therefore come under further pressure. Reduced activity also means that there are fewer opportunities for potential first-time buyers. In 2018, for the first time since 2013, the Dutch Land Registry and the Dutch Association of Real Estate Brokers and Real Estate Experts (NVM) recorded fewer transactions on the residential property market (218,400),and fewer homes were sold (147,700) than in the previous year. This represents a decrease of 9.7% and 10.7% respectively on an annual basis.
In the fourth quarter of 2018, there was an increase in the number of homes sold which were registered by the NVM (almost 39,300 homes) compared to the previous quarter (+9.0%), which is in line with the normal seasonal trend. However, this fourth quarter was down significantly on the previous year (-14.8%). In the fourth quarter of 2018, the Dutch Land Registry recorded approximately 56,400 residential property transactions, which represents a decrease compared to both the previous quarter (-0.9%) and the same quarter in 2017 (-14.8%).
... and mortgage market stabilisation
The declining growth, and in some areas of the housing market even a decline in the number of transactions, has also resulted in stabilisation in the mortgage market over the last two years. This is reflected in both the number of mortgage applications registered by the HDN (Dutch Mortgage Data Network) and the number of new mortgages registered by the Dutch Land Registry. The fact that the number of mortgage applications rose slightly again in the fourth quarter of 2018 is mainly due to the increase in applications for mortgage refinancing.
Still not enough newbuild for sale
The third quarter of 2018 (the most recent data available) saw an end to the decline in the number of new homes sold, which started at the end of 2017. With approximately 7,700 new owner-occupied houses sold, the newbuild market is stabilising compared to the previous quarter, but it is still considerably down on the third quarter of 2017 (-16.7%). For the time being, the supply of new owner-occupied homes over the past quarters does not offer any prospect of an upturn in the newbuild market. In the slightly longer term, there does seem to be light at the end of the tunnel. For the first time in a year, in the third quarter of 2018, the number of owner-occupied new homes for which building permits were granted rose again compared to the previous quarter.
Prices of existing owner-occupied houses continue to rise
General speaking, house prices are continuing to rise. For example, the average price recorded by the NVM in the fourth quarter of 2018 was 10.3% higher than it was a year ago. The Price Index for Existing Housing (of the CBS and Dutch Land Registry) is also increasing, by 9.0% on an annual basis. The price level is now well above pre-crisis levels.
In the fourth quarter of 2018, however, for the first time since 2013, there was also a slowdown or stagnation in the Price Index for Existing Owner-Occupied Housing (PBK) in Amsterdam and Rotterdam. Since mid-2013, the price indices in these cities have risen by 74% and 50% respectively, indicating very sharp increases in house prices. As a result, more and more households are unable to afford owner-occupied homes and the price-quality ratio has become much more unfavourable. Price rises in large cities may well become their own worst enemy.
More information
The quarterly report for the fourth quarter of 2018 is available to download <link bk over-faculteit afdelingen otb kenniscentra expertisecentrum-woningwaarde monitor-koopwoningmarkt _blank>here.
The Monitor Koopwoningmarkt is the result of a collaboration between the Credit Registration Office (BKR), Statistics Netherlands (CBS), the HDN (Dutch Mortgage Data Network), the Dutch Association of Real Estate Brokers and Real Estate Experts (NVM), the Dutch Municipal Housing Incentive Fund (SVn), the Homeownership Guarantee Fund (WEW, operating the Housing Guarantee Fund), and the Association of (Prospective) Homeowners (VEH) and is published by the Housing Value Expertise Centre of the Faculty of Architecture and the Built Environment at the TU Delft.
The RTL Z Huizenindex is based on the quarterly report of the Housing Market Monitor compiled by the Housing Value Expertise Centre and based on currently available statistics for the housing market.
This comprehensive indicator shows the housing market situation at a glance. The joint objective of TU Delft and RTL Z is to create and provide clarity for both consumers and experts, who currently have to rely on a considerable amount of incomplete figures on a monthly basis.