Dutch house prices increase at a record pace, number of houses for sale at an all-time low.

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The Dutch housing market has tightened further, house- and transaction prices keep increasing and the number of houses for sale is at an all-time low. Although the steep growth of house prices has a big impact on affordability, factors as income increases and lower interest rates should also be taken into consideration.

Ongoing increase of Dutch house prices and even higher increase in transaction prices

Dutch house prices increased with 4.4% QoQ over the last quarter and with 13.0% YoY, representing the largest YoY increase in 20 years. In the previous quarter this was 3.6% QoQ and 10.3% YoY.

Transaction prices increased significantly more than the Dutch House Price Index: in March 2021 transaction prices were on average 24.7% higher YoY and Dutch house prices increased by 11.3%, while usually these changes are more similar. The steeper increase in transaction prices indicates that relatively expensive properties were sold. Also, the timing suggests that this is caused by buyers under the age of 35 who made use of the additional tax break for properties in excess of EUR 400,000 before the 1st of April.

Furthermore, the number of properties transferred in 2021-Q2 was close to 53,000, which is a decrease of 20,8% QoQ and 3.9% YoY.

Affordability is impacted by the steep house price growth, but other factors should also be recognized

The discussion about affordability has focused on the steep nominal house price growth. Despite the fact that nominal house prices are around 33% above the peak of 2008, affordability is still better due to income increases and lower interest rates. This, however, does not mean that housing is affordable, but it does put the nominal house price growth into perspective.

<blockquote><p>“Despite the fact that nominal house prices are around 33% above the peak of 2008, affordability is still better due to income increases and lower interest rates.”</p><span class="writer">Jasper Koops</span></blockquote>

The housing market has tightened further

The NVM reported its tightness indicator at a level of 1.4 for the previous quarter, which means home buyers could choose between 1.4 houses on average. An all-time low. Last year, home buyers still had the option to choose between 2.6 houses on average. Also, there were only 15,500 houses for sale during this quarter. This is a decrease of 12% QoQ and 53% YoY, which makes it the lowest number since measurement started in 1995.

A result of the tightening housing market is that outbidding becomes more popular. 50% of the properties have been sold for more than the asking price and only 38% of the properties have been sold below their asking price.

Mortgage spreads decreased across all major fixed rate periods

Mortgage spreads have decreased and swap rates have increased across all major fixed rate periods. The average spread decrease across major fixed rate periods and risk classes was 7 basis points in the second quarter of 2021. Non-parallel changes occurred on the spread curve, with 5-year fixed rates seeing the biggest decrease (10 bps) and 20-year fixed rates seeing on average the smallest decrease (2 bps). This has reverted spreads back to previous quarter levels.

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