Persistant supply shortage
The supply shortage in the Netherlands remains an important recurring topic as this is one of the main drivers of the rising house prices. The forecast for coming years has been revised again, and as it stands, the situation has worsened. In figure 1 below, we highlighted the two forecasts. Based upon the disappointing new construction and the number of building permits issued, the forecast of the housing shortage has been adjusted downwards. Particularly in the short term, it is not yet expected that we will start seeing a rapid improvement. The Netherlands added approximately 82,000 new homes in 2024 (69,000 newly-built homes and 13,000 transformations), significantly below the government's target of 100,000 homes per year. The Ministry of Housing and Spatial Planning projects a potential recovery, with hopes of reaching its target by 2027. Assuming the impact of the new nitrogen ruling by the State Council is limited.
Figure 1: Worsening forecast housing shortage
New nitrogen ruling
The State Council has significantly tightened regulations on internal nitrogen emissions compensation, as per its rulings on December 18, 2024. This decision has farreaching implications for both existing and future construction projects in the Netherlands. Because of the State Council's ruling, residential areas already built may be ‘illegal’, or new construction projects in the pipeline may still need a nature permit. Previously, a business owner who had a permit and wanted to expand, could wipe out new nitrogen emissions if emissions decreased elsewhere within the company or were not used. The ministry of Housing and Spatial Planning does not expect already built residential areas to be demolished as a result of the new ruling. The permit requirements for planned housing developments pose significant risks. These new regulations could cause substantial project delays and potentially jeopardise funding. The Ministry of Housing and Spatial Planning will assess the full impact within weeks, with potential consequences for the national housing construction strategy.
Outlook 2025
Housing Shortage
The persistent housing shortage remains a significant driver of rising house prices in the Netherlands. This issue is not expected to be resolved overnight, contributing to ongoing price increases.
Improved borrowing capacity
Borrowing capacity for potential homebuyers has improved in 2025 due to several factors:
- Expanded NHG Standards: The National Mortgage Guarantee (NHG) standards have been expanded, allowing more buyers to qualify for this type of loan.
- Reduced NHG Commission: The commission to secure an NHG loan has been decreased from 0.6% to 0.4%, making it more affordable for buyers.
- Substantial CLA Wage Increases: Collective Labor Agreement (CLA) wages have risen significantly over the past year. For 2024, an average increase of 6.6% was observed, see also https://dmpm.nl/news/market-reprises-fed-expectations-moving-global-rates-higher
Expected interest rate decline
In the fourth quarter of 2024, the interest rates fluctuated and even went up since December. However, due to the further expected rate cuts of the ECB in 2025, interest rates are anticipated to decrease in 2025, which will enhance borrowing capacity for potential homebuyers.
Projections
According to recent forecasts from leading financial institutions, house prices in the Netherlands are expected to increase significantly in 2025, with Rabobank projecting a 9.2% price increase, ABN AMRO predicting a 7% growth and De Nederlandsche Bank (DNB), who has downwardly revised its earlier estimates, now forecasting a 4% increase for 2025.
In conclusion, the combination of the ongoing housing shortage, improved borrowing capacity, wage growth, and expected interest rate declines are likely to fuel further house price increases in the Netherlands throughout 2025.
Supply-demand ratio
The tightness indicator dropped from 2.4 to 1.8 in 2024, see figure 2 below. This indicates that the number of choices a potential buyer in the housing market has dropped in 2024.
Figure 2: Housing shortage indicator
Sharp increase of transactions in 2024 in Q4 2024
NVM realtors sold 43,000 homes, a 19% increase from the same period in 2023. The total home sales for 2024 reached nearly 145,000, compared to 132,000 in 2023, marking a substantial increase in the Dutch housing market. Reasons attributable to this increase are: the Affordable Rent Act, this led to landlords deciding to sell their property instead of renting it out. The overall sentiment and confidence increased among buyers. All new supply is sold quickly due to the tightness and high demand in the market.
House prices increased by 8,7 in 2024
NVM reports that home prices in the Netherlands increased by approximately €50,000 in 2024, with the fourth quarter showing a 2.5% price growth and the average transaction price reaching €483,000. CBS data shows a potential temporary market fluctuation in December, suggesting a brief pause in continuous price appreciation. Despite this minor deviation, the housing market is expected to continue its upward trajectory in 2025, with potential further price increases anticipated. It will be important to monitor the first quarter of 2025 closely to confirm if the current trends persist or if any new patterns emerge in the housing market. The first quarter of 2025 closely to confirm if the current trends persist or if any new patterns emerge in the housing market.
Figure 3: Small hick up in December
Overbidding still at high level
The Dutch housing market continues to demonstrate strong buyer competition, with transactions consistently exceeding initial listing prices. On average, properties are selling for 4.9% above their asking price, which for a typical home represents an additional €24,000. This trend is notably evident, with nearly 71% of all housing transactions in the current quarter closing at prices higher than the original listing, underscoring the robust demand and limited supply in the market.
Homes are still being sold very quickly
It currently takes an average of 27 days to sell a home, figure 4. Compared to a year ago, this is three days faster. Compared to last quarter, this has not changed. Ninety percent of all homes are sold within one quarter.
Figure 11: Average number of days needed to sell
New home sales rise, but sizes shrinks to keep prices stable
In 2024, new home sales increased, averaging 7,000 units per quarter. However, the market remains tight due to quick sales and limited variety. Apartments dominate the market, comprising 58% of available stock, creating a mismatch between supply and demand. The current construction focus prioritizes affordable housing and inner-city developments. New home prices rose only 1.6% in 2024, maintaining relative stability. This modest increase is attributed to smaller home sizes rather than market cooling. The more rapidly rising prices of existing homes are making new construction increasingly attractive to buyers. Despite increased sales, the housing market continues to face challenges in meeting diverse consumer needs and maintaining affordability.
Want to know more?
This article is the second chapter of our Quarterly Market Update for Q4 2024. In this report, we outline developments in the Dutch economy, the housing market and the mortgage market, and conclude with some key portfolio insights.