Dynamic Credit Dutch Housing Market Update Q3 2022Dynamic Credit Dutch Housing Market Update Q3 2022

Dynamic Credit Dutch Housing Market Update Q3 2022

Jasper Koops - Head of Portfolio ManagementJasper Koops31 October 2022 at 17:00

The Dutch housing market shows its first decrease in house prices, but is relatively less sensitive to steep interest rate increases compared to several other countries.

Meanwhile, spreads have reduced due to high swap rate volatility during the third quarter, but have recovered thereafter.

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House prices increased QoQ, but decreased steeply in September

Dutch house prices increased 0.60% QoQ and 11.90% YoY. In September however, house prices decreased with 0.70% MoM, which is the steepest MoM decrease since April 2013. Real house prices have decreased more steeply due to high inflation.

As for property sales, the number of properties transferred this quarter was roughly 50,000, an increase of 6.50% QoQ and a 6.40% decrease YoY.

“As many countries are sensitive to steep interest rate increases, the Dutch housing market is less affected as borrowers have fixed their interest rates for long periods. ”

Jasper Koops

Steep mortgage rate increases continued this quarter

Mortgage rates increased by 25 bps on average this quarter. Increases in mortgage rates were similar across different risk classes, but more pronounced in the shorter fixed rate periods. Rate increases have accelerated again as mortgage rates increased by another 47 bps on average QtD as monetary conditions tightened further.

Dutch housing market relatively less sensitive to steep interest rate increases

As many countries are sensitive to steep interest rate increases, the Dutch housing market is less affected as borrowers have fixed their interest rates for long periods. The number of forced sales due to increasing reset rates is therefore expected to be marginal in the coming years. Dutch home owners are also generally able to transfer their existing loan to a new property, reducing the lock-in effect.

Mortgage spread volatility reached record-high levels

As a consequence of high swap rate volatility, mortgage spread volatility has reached record-high levels in July and September 2022, significantly higher than observed since the start of measurement in 2014.

As there is a lag between swap rate increases and subsequent mortgage rate increases, spreads tightened across all risk classes and fixed rate periods. The spread of the average top-6 mortgage rates decreased by 66bps QoQ on average. When looking at the YoY changes, spreads decreased by 28bps on average. However, spreads made a substantial recovery after quarter end widening by 88 bps on average.

Household budget measures due to high inflation

The major theme of the governmental budget announcement for 2023 is the steeply increasing cost of living. Measures were announced to contain pressure on the household budget caused by energy prices. The measures are now threefold: a fixed compensation per household for the last two months of 2022, capped energy prices and a subsidy for the most vulnerable households. At European Union level, discussions on how to approach surging energy prices are still going on.

Disclaimer Dynamic Credit Partners Europe B.V. (‘Dynamic Credit’) is a registered investment company (beleggingsondernemingsvergunning) and a registered financial service provider (financiëel dienstverlener) with the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten). This presentation is intended for informational purposes only and is subject to change without any notice.The information provided is purely of an indicative nature and is not intended as an offer, investment advice, solicitation or recommendation for the purchase or sale of any security or financial instrument. Dynamic Credit may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented herein. Dynamic Credit cannot be held liable for the content of this presentation or any decision made by a third party on the basis of this presentation. Potential investors are advised to consult their independent investment and tax adviser before making an investment decision. An investment involves risks. The value of securities may fluctuate. Past returns are no guarantee for future returns.

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Jasper Koops - Head of Portfolio Management
Jasper Koops
Jasper Koops