Strong performance Dutch mortgage market during pandemic, economic impact mostly impacts non-homeowners so far

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The Dutch housing market, like many other housing markets in the Western world, has shown strong performance since the start of the COVID-19 pandemic due to monetary measures keeping interest rates low, fiscal measures protecting incomes and changing preferences of homebuyers due to spending more time at home. Meanwhile, the negative economic impact so far seems to disproportionally affect younger generations, employees with flexible contracts and self-employed. These are subgroups which are underrepresented in the population of homeowners.

House prices increase, origination volume Dutch mortgages normalizes

Consumer confidence in the Dutch housing market increases, with house prices increasing by 2.4% since last quarter. Compared with the previous year, this increase was 8.1%. Over 62.000 properties changed owner last quarter (a 13.2% increase since last quarter) with an average YoY transaction price increase of 11.6%, the steepest increase in 20 years. In those same 20 years, the supply of houses has never been so low as in the last quarter, with 28.000 properties for sale.

Offer volumes normalized after a peak in the Dutch mortgage market in the previous quarter.

“Amsterdam is ranked sixth on the list of cities with risk of a housing price bubble for the 4th consecutive year. We shed a light on a different approach, that suggests that there is no bubble.”

Jasper Koops

Are we experiencing a housing bubble in Amsterdam?

On the Global Real Estate Bubble Index UBS, Amsterdam is ranked sixth on the list of cities with risk of a housing price bubble for the 4th consecutive year, putting the capital city in the same corner as Munich, Frankfurt, Paris and Zurich. We shed a light on a different approach that adds the perspective of the fundamental value of properties to the housing bubble calculation. This approach suggests that there is no bubble, since the difference between house prices and the fundamental value has decreased over the past years due to exceptionally low interest rates and high rents.

New property transfer tax regime, expected impact on Dutch mortgage market

Despite many vocal critics (including the highest competent court in the Netherlands), the Dutch government has announced a change in property transfer tax, where a distinction will be made between first time buyers, subsequent buyers and others. The goal is to make access to the housing market easier for first time buyers. Under the current tax regime, a 2% tax rate applies to the purchase of residential real estate and a 6% rate applies to other real estate. In the new regime, first time buyers are exempt from property transfer tax once, homebuyers will pay the regular 2% rate and other buyers (such as BTL investors, second home buyers, parents buying for their children, etc) will pay a 8% rate.

The measure is not considered to be effective by experts and is expected to cause a 1% increase in house prices in the starter-segment.

Spreads and residential mortgage interest rates Netherlands slightly lower, buy-to-let increasing

Swap rates and Dutch mortgage interest rates decreased this quarter, resulting in lower mortgage spreads. On average, the decrease across major fixed rate periods and risk classes was 4 basis points.

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