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.

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