Dynamic Credit Dutch Housing Market Update Q3 2023Dynamic Credit Dutch Housing Market Update Q3 2023

Dynamic Credit Dutch Housing Market Update Q3 2023

Jasper Koops - Head of Portfolio ManagementJasper Koops31 October 2023 at 17:00

Dutch housing prices might have bottomed out earlier than expected, as they have risen consecutively over the last four months. This, combined with other factors caused by stabilizing mortgage rates, improving affordability and a persistently tight housing market, resulted in Dutch banks revising their house price expectations for 2024 upwards into positive territory.

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Notable shift in mortgage originations and offer volumes

Up to and including September 2023, approximately EUR 75 billion on mortgage loans have been originated. Compared to about EUR 110 billion during the same period a year earlier, this translates into a decrease of total originated mortgage amount of 32% YoY in 2023 so far.

In the third quarter of 2023, approximately 93,000 mortgage offer requests were recorded in total, marking a 9.90% decrease compared to the same period a year earlier, and 60,000 purchase offers, reflecting a modest decrease of 0.20% YoY. Interestingly, about 17,000 of these offers involved borrowers utilizing the portability option as opposed to 9,600 portability mortgage offers in 2022-Q3, an increase of roughly 72% YoY. Also, due to the current higher interest rates on new mortgages, refinancing is less appealing to borrowers. This resulted in a substantial drop of around 24% YoY in the refinancing segment, with approximately 33,000 mortgage offers in total.

Dutch housing prices are on the rise again, changing expectations for 2024

Dutch housing prices increased by 1.24% QoQ this quarter, but were still down 4.60% YoY. The number of housing transactions was about 47,000 in total, an increase of 5.50% QoQ, but a decrease of 6.90% YoY. After the downturn in housing prices observed from 2022-Q2 till 2023-Q1, as of September 2023 housing prices have been rising again for the past four consecutive months.

As a result, forecasts for Dutch housing prices are showing a reversal compared to the first half of 2023. The decline in housing prices over the year 2023 is now on average expected to total 2.33% compared to 5.20% forecasted in 2023-Q2 and, whereas initially a decrease in housing prices of 2.20% was expected for 2024, the average forecast now expects an increase of 2.97% for 2024. This earlier than expected stabilization is attributed to larger than previously expected wage growth and higher growth of the number of households. In addition, the beginning of decreasing capital market rates are expected to be seen in 2024, contributing to improvement in housing affordability.

Contributing to a sustainable Dutch housing market

The Versnelcoalitie voor Groene Woninginvesteringen is a collaborative effort aimed at promoting sustainable housing in the Netherlands through affordable financing. The coalition comprises various stakeholders and aims to work together with the government to create favorable market conditions that facilitate homeowners in making sustainable investments.

Also, the bijBouwe mortgage label has adopted a forward-thinking approach to promote sustainability in home financing. Specifically targeting homes with energy label D or worse, bijBouwe will only provide financing if these homeowners present a solid improvement plan to elevate their home’s energy label to C or better. This initiative promotes energy efficiency improvements and contributes to the broader goal of enhancing energy efficiency in the Dutch housing sector.

The newly built homes market remains under pressure

During the second quarter of 2023, the number of newly built transactions dropped by approximately 56% compared to the same period a year earlier, the largest decline since measurement began in 2015. In total, roughly 3,300 newly built homes were sold during 2023-Q2, compared to 7,600 during 2022-Q2. By now, the average price for a new home is approximately EUR 496,000, a decrease of roughly 3.50% YoY (from EUR 514,000). Also, the average number of building permits issued per month has dropped substantially from around 4,500 up to May 2023 to only about 3,800 in July 2023, marking a decrease of almost 44% compared to July of the previous year. This substantial decline is expected to have an effect on new construction the coming years.

Mortgage rates saw a relatively uniform increase and spreads remained volatile

In the third quarter of 2023, mortgage rates increased again after a relatively stable second quarter. In contrast to earlier periods with substantial differences between short and long-term rate developments, this quarter saw a relatively even increase across fixed rate periods by an average of 14 bps QoQ and 40 bps YoY. After the quarter end, mortgage rates increased by an additional 16 bps.

Mortgage spreads are up 10 bps YoY, but remained volatile throughout the quarter. On average spreads tightened by 22 bps QoQ, but widened 14bps after quarter end.

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