The Netherlands’ housing market downturn continues

After almost a decade-long house price boom, the Netherlands’ housing market is now rapidly cooling, amidst falling demand caused by rising interest rates and aggravated by sluggish economic growth.

In Amsterdam, the capital, the price of existing homes fell by 5.68% in Q3 2023 from a year earlier (-8.05% inflation-adjusted), in sharp contrast to the strong y-o-y growth of 8.51% seen in Q3 2022, according to Statistics Netherlands (CBS). Nationally, house prices dropped 4.56% (-6.95% inflation-adjusted) over the same period – the third consecutive quarter of y-o-y decline and the biggest fall since Q3 2013.

Though quarter-on-quarter, house prices in the capital city increased by 3.55% (2.5% inflation-adjusted) in Q3 2023 while they were up slightly by 1.24% (0.21% inflation-adjusted) on a national level.

By property type, in Q3 2023:

  • Apartment prices fell by 4.47% (-6.86% inflation-adjusted) y-o-y in Q3 2023, in sharp contrast to the prior year’s 9.69% increase.
  • Terraced house prices were down by 4.24% (-6.64% inflation-adjusted), following a huge y-o-y increase of 11.62% in Q3 2022.
  • Detached house prices fell by 5.02% (-7.4% inflation-adjusted) during the year to Q3 2023 – after increasing strongly by 13.67% in the previous year.
  • Semi-detached house prices dropped by 4.89% (-7.28% inflation-adjusted), in stark contrast to a y-o-y increase of 12% in Q3 2022.
  • Corner houses saw an average price decline of 4.42% (-6.82% inflation-adjusted) y-o-y in Q3 2023, following an annual price increase of 11.25% in the same quarter in the prior year.

The Netherlands’s house price annual change

After a great housing boom (1995-2007), the Dutch housing market weakened in 2008 and only began to recover in 2014. From Q1 2014 to Q4 2019, house prices rose by almost 40% nationally, with very strong increases in Amsterdam (77.4% growth) and Rotterdam (61.8% growth). Despite the Covid-19 pandemic, nationwide house prices rose by a huge 27.3% from 2020 to 2021.

However, the housing market started to weaken in 2022, with nationwide house price growth decelerating to 5.1%. House prices rose by just 1.2% in Amsterdam and by 2.5% in The Hague and declined by 1.2% in Utrecht.

HOUSE PRICES, ANNUAL CHANGE (%)
Year Nominal Inflation-adjusted
2008 1.70 -0.24
2009 -5.69 -0.24
2010 -0.80 -2.68
2011 -4.11 -6.38
2012 -6.90 -9.52
2013 -3.71 -5.27
2014 1.87 1.16
2015 3.27 2.56
2016 6.73 5.69
2017 8.25 6.91
2018 8.39 6.31
2019 6.48 3.66
2020 8.77 7.68
2021 19.60 14.17
2022 5.14 -5.49
Sources: Statistics Netherlands (CBS), Global Property Guide

Demand is falling. In the first eleven months of 2023, the total number of dwellings sold in the Netherlands fell by 5.2% to 162,838 units, following a 14.6% decline during the whole year of 2022, according to CBS.

The Dutch housing market is expected to gradually stabilize, but house purchases will remain low and will reach their lowest levels this year. “Owner-occupied homes are now almost as (un)affordable as they were in early 2022. For 2024, we expect home prices to match the 2022 peak and the number of sales to reach their lowest point,” said Rabobank Economic Research.

“The sharpest decline in sales is behind us and we expect the number of sales to bottom out in 2024. For 2023, we expect 183,000 sales, followed by 180,000 transactions in 2024. For 2025, we anticipate 184,000 sales,” added Rabobank.

The overall economy has slowed considerably. The Dutch economy grew by a minuscule 0.1% in 2023 from a year earlier, a sharp slowdown from strong annual expansions of 4.3% in 2022 and 6.2% in 2021, according to figures released by the DNB. The economy is expected to gradually improve, with projected real GDP growth rates of 1.1% in 2024 and 1.7% in 2025, according to the European Commission (EC).

History of the Netherlands’ housing boom and bust

Median house prices in the Netherlands rose by 104% (73% inflation-adjusted) from Q1 1996 to Q2 2001, or by an average of 21% annually (14.6% inflation-adjusted). Amsterdam house prices rose by about 132% (96% inflation-adjusted) during this period. This was a time when real private sector wages rose by 3.6% annually.

House prices continued to rise until Q1 2008, alternating between slow growth and rapid growth.

However, with the global financial crisis, coupled with the Eurozone debt crisis, the Dutch housing market went into a tailspin. By 2013 things were so bad that the total number of dwellings sold had dwindled by almost half, to around 110,094 units, compared to an average of 206,000 dwellings sold annually from 2005 to 2007.

CHANGES IN AVERAGE HOUSE PRICES (%)
  Economic boom (Q1 96-Q2 01) Political instability, economic downturn (Q3 01-Q1 03) Economic recovery (Q2 03-Q2 06) Political instability, economic growth (Q3 06-Q4 07) Global financial crisis, eurozone debt crisis (Q1 08-Q4 13) Economic growth (Q1 14-Q4 19) Global pandemic (Q1 20-Q4 21) Economic recovery (2022)
Netherlands 104.4 4.7 15.3 3.8 -15.6 39.8 27.3 5.1
Groningen 100.1 8.7 16.9 2.9 -12.7 36.2 32.3 5.7
Zuid-Holland 98.9 3.3 16.1 2.2 -10.5 44.7 25.7 5.2
Noord-Brabant 107.9 5.8 13.6 3.8 -20.4 32.7 25.2 6.8
Amsterdam 131.6 -6.5 5.6 12.1 -17.7 77.4 20.0 1.2
Rotterdam 109.4 1.9 21.2 6.7 -11.9 61.8 26.5 4.1
Sources: Statistics Netherlands, Global Property Guide

In 2014 the Dutch housing market started to recover. From Q1 2014 to Q4 2019, house prices rose by almost 40% nationally, with very strong increases in Amsterdam (77.4% growth) and Rotterdam (61.8% growth). Despite the Covid-19 pandemic, the housing market remains resilient, with nationwide house prices rising by another 27.3% from Q1 2020 to Q4 2021.

Then in 2022, house price growth in the country slowed to 5.1%. House prices rose by just 1.2% in Amsterdam and 2.5% in The Hague, and declined by 1.2% in Utrecht. 

House prices started to fall in 2023, amidst rapidly rising interest rates and a slowing economy.

The Netherlands House Price Index in Major Provinces graph

Demand continues to fall

In the first eleven months of 2023, the total number of dwellings sold in the Netherlands fell by 5.2% to 162,838 units, following a 14.6% decline during the whole year of 2022, according to figures from CBS.

By dwelling type:

  • Apartment sales fell by 5.6% y-o-y to 37,060 units in the first three quarters of 2023, after declining by 7.7% for the whole year of 2022.
  • Terraced house sales dropped by 5.7% y-o-y to 45,552 units in Q1-Q3 2023, following a 13.6% decline during 2022.
  • Detached house sales were down by 11.4% y-o-y to 16,505 units over the same period, after a huge fall of 20.8% during 2022.
  • Semi-detached house sales dropped 7.1% y-o-y to 13,814 units, after falling by 15.7% in the full year of 2022.
  • Corner house sales declined by 5.2% y-o-y to 17,919 units in Q1-Q3 2023, following a 15.5% decline last year.

The time-to-sell, which is the total number of days from the moment a house is put up for sale to the date of sale, stood at 33 days in Q3 2023, slightly down from 34 days in the previous quarter but up from 27 days a year earlier, based on figures released by NVM.

“In recent years, the number of transactions of existing owner-occupied homes decreased significantly. This was mainly due to the lack of supply,” said Rabobank. “In 2022, the counter remained at 193,000 homes sold, 14.6 percent less than in 2021. It is noteworthy that the number of home sales has been declining at a much slower rate in recent months despite falling house prices.”

The Netherlands Number of Dwellings Sold graph

Residential construction activity weakens

In the first eleven months of 2023, dwelling completions in the country fell slightly by 0.1% to 67,077 units, following annual increases of 4.7% in 2022 and 1.8% in 2021 and a decline of 2.2% in 2020, based on figures from Statistics Netherlands.

From an annual average of 76,300 units from 2000 to 2009, completions dropped sharply to an average of 60,000 units annually from 2010 to 2022 - mainly due to post-2010 changes in the planning system - which partly explains the rapid rise in house prices in recent years. Pandemic-related restrictions in the past three years weakened residential construction further.

There were 34,502 housing units put up for sale in Q3 2023, down by 9% from the previous quarter and by 18% compared to the same period last year, according to NVM.

The total housing stock in the Netherlands reached 8,125,229 units in 2023, up slightly by 1% from the prior year. Single-family homes accounted for about 63.5% of total stock.

The Netherlands Dwellings Completions graph

Mortgage interest rates are rising rapidly

In November 2023, the average interest rate for new housing loans surged to 4.12%, sharply up from 3.23% a year earlier and 1.65% two years ago.

For new housing loans, by initial rate fixation (IRF):

  • Floating rate and IRF up to 1 year: 5.12% in November 2023, far higher than the 3.36% in November 2022 and 1.61% in November 2021
  • IRF 1-5 years: 4.68% in November 2023, sharply up from 3.54% in the previous year and 1.63% two years ago
  • IRF 5-10 years: 3.94%, up from 3.3% in the previous year and 1.55% in the two years prior
  • IRF 10 years or more: 3.3%, up from 2.99% a year earlier and 1.75% two years ago

The Netherlands Interest Rates for New Housing Loans graph

For outstanding housing loans, the average interest rate was 2.53% in November 2023, slightly up from 2.32% in November 2022 and from 2.37% two years ago. 

Over the same period, by maturity:

  • Original maturity of less than or equal to 1 year: 5.29% in November 2023, sharply up from just 2.84% in the previous year and 1.88% two years ago
  • Original maturity of 1-5 years: 4.29% in November 2023, up from 2.78% in the previous year and 2.05% two years earlier
  • Original maturity of more than 5 years: 2.51%, slightly up from 2.31% in November 2022 and from 2.37% in November 2021

The Netherlands Interest Rates for Outstanding Housing Loans graph

New housing loans falling sharply

Because of rising interest rates, new housing loans drawn plummeted by 36% to just €73.03 billion (US$79.84 billion) in the first eleven months of 2023 as compared to the same period last year, based on DNB figures.

The Netherlands New Housing Loans Approved graph

By IRF, in Jan-Nov 2023:

  • Floating rate and IRF up to 1 year: €15.44 billion (US$16.88 billion) in the first eleven months of 2023, up by 5.8% from a year earlier
  • IRF 1-5 years: €7.37 billion (US$8.05 billion), down by 3.4% from the previous year
  • IRF 5-10 years: €31.25 billion (US$34.16 billion), down sharply by 17.3% from a year earlier
  • IRF 10 years or more: €18.97 billion (US$20.74 billion), plummeted by 65% from a year earlier

Almost 69% of new housing loans were fixed-rate mortgages (FRM) of 5 years or more as of November 2023, amidst rapidly rising interest rates.

The Netherlands Share of Mortgage by Initial Rate Fixation graph

The size of the mortgage market continues to shrink

From 68% of the GDP in 2003, the Dutch mortgage market expanded to almost 84% of GDP in 2009, based on the Global Property Guide estimates. However, since then, there has been a sharp contraction in the size of the residential mortgage market relative to the economy – to about 57% of GDP in 2023, mainly due to the introduction of new reforms to discourage borrowing.

The Netherlands Housing Loans Outstanding graph

As of November 2023, total outstanding housing loans rose slightly by 1.7% from a year earlier to €570.32 billion (US$623.53 billion), according to the DNB, following annual increases of 2.9% in 2022, 1.7% in 2021, 0.6% in 2020 and 1% in 2019. 

The previous rise of mortgage debt – the fastest among OECD countries from 2004 to 2010 – was rooted in aggressive government promotion of homeownership since the 1980s. The Dutch fiscal regime allows full tax deductibility of most mortgage interest payments if:

  • The house purchased is the main residence
  • The mortgage loan has a period of a maximum of 30 years
  • The profit made on the sale of the previous houses is used to reduce the size of the mortgage on the next one

Since 1995, 90% of new mortgages have been not repayable till loan maturity, while 30% do not have to be repaid at all (“interest-only”).

The Netherlands Loans for House Purchase graph

To discourage excessive mortgage growth, the government made some modest changes around a decade ago:

  • In 2001 it removed tax deductibility for mortgages used for non-housing consumption, investments, and second-home purchases.
  • In 2002, interest deductibility was limited to 30 years.
  • From January 2004, homeowners moving to more expensive homes have had to use their capital gains on their former house for a down payment.

Starting in 2013, the government implemented new reforms:

  • The maximum mortgage tax relief was reduced to 38% from 52% over the period of 28 years.
  • Mortgages must be amortized over 30 years to be eligible for mortgage interest relief. First-time buyers may have an interest-only mortgage on 50% of the property’s value, but the loan’s interest is not tax deductible.
  • The maximum loan-to-value (LTV) ratio was slowly trimmed from 105% in 2013 (including the 2% stamp duty) to 100% in 2018 where it has stayed since.
  • Effective July 1, 2015, the mortgage guarantee (NHG) for mortgages was reduced from €265,000 (US$ 289,611) to €245,000 (US$ 267,753) but was again increased annually in the past six years. In 2024, the NHG limit was increased further, so more people will be eligible for an NHG-backed mortgage when purchasing a new house or remortgaging.
    • NHG limit: In 2024, the maximum amount is €435,000 (US$475,584) for existing and newly built properties without energy-saving features, up from €405,000 (US$442,785) in 2023 and €355,000 (US$388,120) in 2022.
    • Energy-efficiency measures: the limit is higher when energy-efficiency measures are included in the mortgage, at €461,100 (US$504,119) in 2024, up from €429,300 (US$469,352) in 2023 and €376,300 (US$411,407) in 2022.
    • Lower mortgage guarantee fee in 2024.
    • In 2024, one can switch from a mortgage without the NHG to an NHG-backed mortgage, provided that the NHG conditions are fulfilled.

Free market yields are good, particularly in The Hague

Gross rental yields in the small up-market decontrolled sector continue to be attractive, at an average of 5.19% in Q2 2023, based on a research conducted by Global Property Guide in August 2023.

  • In Amsterdam, rental yields on apartments range from 3.04% to 6.04%, with a city average of 5%.
  • In The Hague, yields are higher at around 6.07% to 8.12%, with a city average of 6.89%.
  • In Rotterdam, apartments offer rental yields of between 4.72% and 6.91%, with a city average of 5.5%.
  • In Utrecht, rental yields range from 2.71% to 5.49%, with a city average of 4.18%.

 These returns are not princely - but they beat many other countries, given the security of the Netherlands, its stability, rule of law, generally vibrant economy, and good long-term prospects.

The Hague is a less expensive city to buy in and merits consideration by investors. First, it is the seat of government, so most foreign embassies in the Netherlands and 150 international organizations are located in The Hague, including the International Court of Justice and the International Criminal Court. Several large international businesses have their headquarters in The Hague, including Shell, the world’s second-largest company in terms of revenue. This means that there is an ideal group of expatriate tenants to whom owners can rent their apartments, as 26% of the jobs in The Hague are either offered by the Dutch government or by international institutions. In addition, for those interested in the short-term rental market, tourism is important, with 1.2 million tourists every year.

The Netherlands House Prices vs Consumer Prices graph

Rents continue to rise

The average monthly rent in the private liberalized housing sector rose by 4.5% in 2023 from a year earlier, up from annual increases of 3.8% in 2022, 2.2% in 2021, 3% in 2020, 3.3% in 2019, and 3.1% in 2018, according to Statistics Netherlands.

Overall, the rent increase for dwellings (including rent harmonization) was more modest at 2% last year, after y-o-y increases of 3% in 2022, 0.8% in 2021, 2.9% in 2020, 2.5% in 2019, and 2.3% in 2018. In Amsterdam, the rent increase was 2.8% while it was 2.7% in The Hague and 2.6% in Rotterdam.

The Netherlands Rent Increase for Dwellings graph

In the “free market” sector, which is 8% of the rental stock, rent increases can only occur once per year (applies only to basic rent), but otherwise, depend on clauses in the contract. Usually, the annual rent increase is based on the price index number, or around inflation. Some contracts may also include a clause stating that rent will be increased to market value every five years.

In the social housing market, the maximum basic rent in the Netherlands for rent-controlled dwellings is currently at €808.06 (US$883.5) per month, up from the rent control limit of €763.47 (US$834.8) in 2022, €752.32 (US$822.6) in 2021, and €737.14 (US$806) in 2020. Apartments with basic rents (excluding service and additional charges) lower than or equal to this deregulation threshold are classified as rent-controlled dwellings. About 92% of the rental stock falls in this category, based on ABF Research and IVBN.

The maximum income allowed to live in rent-controlled dwellings is usually raised every year. In theory, only individuals with incomes below the limit are entitled to rent-controlled dwellings.

More specifically, housing associations are required to let 92.5% of their vacant social houses every year to households with income of up to €44,035 (US$48,151) for one-person households or €48,625 (US$53,170) for multi-person households. The remaining vacant social houses are left to households with higher incomes. 

The Netherlands’ inefficient housing subsidies discourage geographical mobility

Traditionally, Holland has had a large social rental housing sector. In the 1950s, owner-occupants accounted for only 29% of the housing stock.

Then the government began promoting home ownership. Now about 60% of the total housing stock is owner-occupied. But in many major cities (Amsterdam, The Hague, Rotterdam, and Utrecht), about 50% of the housing stock is social housing.

Homeowners receive favorable tax treatment. Aside from full income tax deductibility of mortgage interest payments, capital gains from rising house prices are also not taxed. However, this is partly offset by an annual imputed rental income tax, based on the property’s assessed value.

The government provides home-ownership grants to low-income households. Many renters also receive direct government subsidies to keep their rent-to-income ratio within certain limits.

About 39% were rented houses while 61% were owner-occupied. A huge proportion of rented accommodation is owned and managed by housing corporations, which manage about 2.4 million dwellings.

The system is highly inefficient in terms of social objectives. It also reduces mobility both for owner-occupiers and renters.

Sluggish economic growth, easing inflationary pressures

The Dutch economy grew by a minuscule 0.1% in 2023 from a year earlier, a sharp deceleration from strong annual expansions of 4.3% in 2022 and 6.2% in 2021, according to figures released by the DNB.

“The main causes of the economy’s cooling are the downturn in global trade and the European Central Bank’s monetary policy, which is needed to fight high inflation,” said the DNB.

The economy is expected to gradually improve, with projected real GDP growth rates of 1.1% in 2024 and 1.7% in 2025, according to the European Commission (EC).

“In 2024 and 2025, quarterly growth is forecast to pick up progressively, as a further drop in inflation, coupled with still strong wage growth, are set to support real disposable incomes,” said the European Commission.

“With demand from the main trading partners stabilizing, the contribution from net trade is projected to improve, moving from negative in 2023, to broadly neutral in 2024 and slightly positive in 2025. Growth is also expected to be supported by increased public consumption and investment,” the Commission added.

The Netherlands GDP Growth and Inflation graph

The Dutch economy is heavily dependent on foreign trade, with exports accounting for 83% of the country’s GDP, making the economy very susceptible to external shocks. For instance, the euro crisis sent the Netherlands’ economy into a recession in 2011 which continued in 2012 and 2013, with economic contractions of 1.1% and 0.2%, respectively. Then in 2020, the COVID-19 pandemic caused the economy to contract by 3.9% - its worst showing in recent history.

The domestic economy grew by an annual average of just 1.4% from 2010 to 2019.

The Dutch government was estimated to have recorded a budget deficit equivalent to about 0.5% of GDP in 2023, following deficits of 0.1% in 2022, 2.2% in 2021, and 3.7% in 2020, and surpluses of 1.8% in 2019, 1.5% in 2018, and 1.4% in 2017.

The shortfall is projected to increase to 1.8% of GDP this year and to 2% of GDP in 2025, amidst an expected increase in government spending due to the plan to introduce a limited set of measures to support the purchasing power of low-income households, according to the EC forecast.

Despite this, the country’s gross public debt fell to around 47.1% of GDP in 2023, from 50.1% in 2022, 52.5% in 2021 and 54.7% in 2020. The current debt level is far below the permissible upper limit of 60% stipulated by the EU Stability Pact.

Overall inflation eased to 1.2% in December 2023, from 1.6% in the previous month and 9.6% in the same period last year. Consumer prices rose rapidly during 2022, with overall inflation averaging 11.6%, the highest in recent history, mainly due to a surge in energy prices. This compared to an average inflation of just 1.9% from 2000 to 2021.

The labor market remains tight. Nationwide unemployment was 3.5% in November 2023, slightly down from 3.6% both in the previous month and a year earlier, according to CBS. Joblessness averaged 6% from 2012 to 2022.

There were about 357,000 unemployed people in November 2023, down by 7,000 from the previous year.

The Netherlands Unemployment Rate graph

Sources: