What is clear is that, for now, the uncertainty in the housing market remains. Whereby the supply shortage, the high demand for housing, the further declining mortgage interest rates, stabilizing inflation and the trend of rising wages will certainly have a price-raising effect in the time to come.
Supply shortage remains
Due to the high population density and competing demands for limited space that is available, there will be a significant housing shortage in the foreseeable future. There is currently a shortage of more than 400,000 homes. And in 2050 the housing shortage will still be an issue, given the estimated shortage of 150,000 homes in the latest optimistic forecasts.
To tackle this issue, the Dutch government is aiming to build/create 100,000 per year. But two issues need to be taken into account. First of all, adding 100,000 houses annually to the housing stock is ambitious. Secondly, one of the inputs that is used to calculate the annual shortage is the expected population growth rate. But the fact is that the population growth has been grossly underestimated over the last decade, and as a result the home shortage risk will further increase.
The target of building 100,000 new homes consistently per year is ambitious because of this population growth. Also other factors such as labor shortages in the construction sector, the lack of availability of land and environmental restrictions play an important role. Moreover, the €5bn allocated by the government to stimulate the increase of available homes may not be sufficient and needs to be adjusted for inflation and unforeseen costs . All in all achieving the targeted 100,000 houses per year on short notice, seems to be very challenging if not impossible.
Housing market still crowded despite tightness
The housing market continued to be under pressure in the third quarter, due to a shortage of available homes, posing major challenges especially for first-time buyers. The scarcity creates a fighting market, with overbidding remaining the rule. Adjustments in lending standards and increased incomes have made homes for sale more accessible to buyers, which has increased demand.
Supply-demand ratio close to 15 year lows
The tightness indicator dropped from 2.6 to 2.1 in one year, figure 1. The indicator says something about the ratio of supply to transactions, the lower the indicator the tighter the market.
Figure 1 Housing shortage
NVM reports highest number of transactions in almost four years
Over the last quarter the Dutch Association of Realtors (NVM) also reported the highest number of homes sold, by NVM brokers, in almost four years. This is notable because normally in the quarter that includes the holiday season, far fewer homes are sold. NVM attributes the upward trend to slightly more homes being offered for sale in a tight market with increasing confidence and improved financing options.
House prices have further room to rise
In one year, the average price of homes sold in the Netherlands increased by €50,000. However, the price development in the third quarter showed just a small plus of 0.4% and an average transaction price of €473,000. Only €2,000 more than in the previous quarter. The increase is thus much smaller than the 7.7% increase achieved last quarter, figure 2. As already mentioned, in the third quarter, which includes the holiday season, prices usually rise less sharply, but the minimal increase this quarter seems to be a correction to the very sharp rise last quarter. But, given lower mortgage rates, strong wage growth and a continuing housing shortage, there is every reason to expect for house prices to go higher.
In addition, higher home prices are leading most homeowners to have surplus value, which more and more often is used to remodel the home or make it more sustainable.
Figure 2 House prices at record high
New housing construction
Already more sales in 2024 than in all of 2022 and 2023
The number of new construction is increasing. This was necessary, as a low point was reached at the end of 2023. Nearly 23,200 new construction homes went on sale in 2024. This is more than in the first three quarters of 2021, 2022 and 2023. Sales tend to decline in the third quarter, including 2024. With over 6,300 homes sold, there is a significant drop from the 7,800 in the previous quarter. However, this decline is normal. Less new supply comes on the market during the summer and many home seekers pause their search. Despite the decline, sales momentum remains good. The good sales momentum is also evident from a comparison with last summer's numbers, this year 27% more homes were sold. Sustainability, especially the associated lower energy costs, remains the main reason why home seekers choose new construction. This reports NVM following a survey of new-build estate agents it conducted.
Rental market
Number of homes in rental market drops sharply
It is not only the purchase market that is in trouble; finding a rental property is also almost impossible. On July 1, 2024 the Affordable Rent Act went into effect, with which former Minister De Jonge (Wonen) intended to make rents affordable again. The law results in a large number of medium-priced rental properties falling under regulated rent, with corresponding maximum rents. This would eventually reduce the rent of as many as 300,000 homes by an average of €190. There is also a ban on temporary rental contracts and grumbling about the tax burden.
Because of these new government measures many landlords decided to sell their property. The number of available homes in the non-subsidized rental housing has dropped by more than a third, causing the rent per square meter price to rise sharply.
The Pararius Rent Monitor shows that tenants again have less choice and have to pay more. Across the Netherlands in the third quarter of this year, only 12,368 non-regulated rental properties became available for new tenants, a decrease of 37.6% compared to a year earlier.
The average square meter price of non-subsidized rental property rose by 7.4% in the third quarter of 2024 compared to a year ago. That average rent is €1751.61 per month. Government measures designed to better protect tenants therefore seem to be counterproductive.
Figure 3: Average number of days needed to sell
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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.