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Aug 18, 2016

Dutch house prices rising strongly

by Lalaine C. Delmendo


Netherlands house price chartHouse prices are rises at an accelerating pace in the Netherlands, despite modest economic growth.

In Amsterdam, the price of existing homes surged by 14.7% during the year to Q2 2016. Nationally, the average house price rose by 4.65% (4.65% inflation-adjusted) to €242,089 (US$270,002), according to Statistics Netherlands (CBS), and by 1.21% (1.21% inflation-adjusted) during the latest quarter (Q2 2016).

All property types rose in price, nationwide, during the year to Q2 2016.

  • Apartments saw the biggest price increase of 6.8%, to an average of €196,566
  • Terraced house prices rose by 5.1%, to an average of €226,307
  • Semi-detached house prices increased 4.4%, to an average of €267,352
  • Detached house prices rose by 2%, to an average of €359,902
  • Corner houses saw price increases of 5.4%, to an average of €235,471

After a housing boom lasting almost 15 years, the Dutch housing market weakened in 2008, and only began to recover in 2014. Based on NVM’s figures:

  • In 2008, house prices fell by 5.33% (-7.55% in real terms)
  • In 2009, house prices dropped by 1.5% (-2.4% in real terms)
  • In 2010, house prices rose by a meager 0.96% by dropped 0.65% in real terms
  • In 2011, house prices dropped by 3.63% (-6.06% in real terms)
  • In 2012, house prices fell by 6.7% (-9.54% in real terms)
  • In 2013, house prices increased by 0.24%, but dropped 1.25% in real terms
  • In 2014, the housing market started to recover, with house prices rising by 3.65% (2.7% in real terms)
  • In 2015, house prices rose by 5.15% (4.47% in real terms)

Demand is surging. Property transactions rose by 16.1%  to 178,293 units, the most since 2008, according to Statistics Netherlands (CBS). In the second quarter of 2016, dwelling transactions rose 23.6% compared to the same period last year, with sales up in all major cities and municipalities. 

Rabobank forecasts that nationwide house prices will increase by 3.5% to 5.5% y-o-y this year and by 5% to 7% in 2017. Transactions are also expected to rise from 178,000 units in 2015 to around 200,000 to 220,000 units next year.

The Dutch economy expanded by 1.9% in 2015,  and GDP growth of 1% in 2014.  Economic growth is expected TO BE 1.7% this year.

Recovery in all cities and provinces!

Netherlands house price index

House prices rose in all the Netherlands' provinces and cities during the year to end-Q2 2016.  According to Statistics Netherlands:

  • In Amsterdam, existing homes surged by 14.7% during the year to Q2 2016, up from 8.1% a year earlier and the highest growth since 2000. House prices increased 4.6% during the latest quarter (Q2 2016).
  • In Rotterdam, existing home prices increased by 5.7% during the year to Q2 2016, the ninth consecutive quarter of annual increases and the biggest increase in the past 15 years. House prices increased 2.1% during the latest quarter.
  • In Groningen, existing homes rose by 2.4% during the year to Q2 2016, slightly down from a y-o-y growth of 2.6% Q2 2015. House prices increased 0.9% during the latest quarter.
  • In The Hague, existing homes rose by 8% during the year to Q2 2016, the biggest annual increase in more than 7 years. House prices increased 2.2% during the latest quarter.
  • In Utrecht, house prices rose by 5.7% during the year to Q2 2016, up from 3.2% during the year to Q2 2015 and 1.6% to Q2 2014. House prices increased by 1.1% during the latest quarter.

For the country’s major provinces:

  • In Zuid-Holland, the country’s most populous province, house prices rose by 4.7% y-o-y in Q2 2016, the ninth quarter of annual price increases after almost five years of decline. House prices in the area increased 1.4% during the latest quarter (Q2 2016).
  • In Noord-Holland house prices rose by 7.4% during the year to Q2 2016, an improvement from the annual rises of 5.4% in the previous year and 2.3% in Q2 2014. Quarter-on-quarter, house prices increased 2% during the latest quarter.
  • In Noord-Brabant the price of existing homes rose by 3.3% during the year to Q2 2016, up from the y-o-y rise of 2% in the previous year. Despite the modest growth, it was rather a progress from a 21-quarter y-o-y price declines from Q1 2009 to Q1 2014. House prices increased slightly by 0.4% during the latest quarter.
  • In Gelderland house prices rose by 3% during the year to Q2 2016, up from annual rises of 2.6% in Q1 2016, 2.5% in Q4 2015, 2.2% in Q3 2015, and 1.3% in Q2 2015. House prices increased slightly by 0.3% during the latest quarter.

History of the Netherlands' housing boom and bust

Median house prices in the Netherlands rose 80.8% (59% in real terms) from Q1 1996 to Q2 2001, or by an average of 11% annually (8.4% in real terms). Amsterdam house prices rose 111% (86% in real terms) during this period.

The economy grew 3.7% annually. During this period real private sector wages rose by 3.6% annually while inflation was only 2.4%, leading to significant increases in purchasing power.

Despite slower economic growth of 0.9% annually from 2001 to 2004, house prices rose by an average of 3.9% (1.2% in real terms) annually from 2001 to 2004.


Netherlands   97.2  6.7 13.3 4.7 -19.5 7.7
Groningen 74.5 10.9 20.9 3.2 -19.8 6.4
Zuid-Holland 89.7 8.3 13.0 4.0 -17.5 8.6
Noord-Brabant 99.0 7.5 12.9 4.5 -22.1 6.2
Amsterdam 150.2 -1.0   12.3 12.6 -16.7 27.3
Rotterdam  87.6  10.5   12.0 3.0 -11.4 11.4
Source: Statistics Netherlands (CBS)

By Q2 2006, house prices in Netherlands had risen 13.3% on three years earlier, with strong increases in Groningen (20.9%) and in Zuid Holland (13%).

Despite a political crisis, house prices rose by 4.7% from Q3 2006 to Q4 2007, propelled by economic growth of 4% in 2006 and 2007. Amsterdam registered the highest house price increase of 12.6% from Q3 2006 to Q4 2007.

The bust began in 2008

However with the global financial crisis the housing market went into a tailspin, and house prices fell by 5.33% (-7.55% in real terms) in 2008, and by 1.5% (-2.4% in real terms) in 2009, as GDP growth slowed to 2% in 2008, and contracted by 3.3% in 2009.

Despite a modest economic recovery in 2010-11 with average GDP growth of 1.4%, the Dutch housing market remained depressed, with house prices rising by a meagre 0.96% (-0.65% in real terms) in 2010 and falling by 3.63% (-6.06% in real terms) in 2011 and by 6.7% (-9.54% in real terms) in 2012, though with a slight increase of 0.24% (-1.25% in real terms) in 2013. The economy contracted by 1.6% in 2012 and by another 0.7% in 2013.

By 2013 things were so bad that the total number of dwellings sold in Netherlands had dwindled by almost half, to around 110,094 units, compared to an average of 206,000 dwellings sold annually from 2005 to 2007.

House sales are rising strongly

However in 2014, the Dutch housing market started to recover, as economic conditions improved. From Q1 2014 to Q2 2016, house prices in the Netherlands rose by 7.7%, with strong increases in Amsterdam (27.3%) and in Rotterdam (11.4%).

As the recovery continues, the Dutch housing market is expected to rise more strongly in the coming months.

Netherlands dwellings sold

The number of property transactions rose by 16.1% y-o-y to 178,293 units, the highest level since 2008, according to Statistics Netherlands (CBS). West-Nederland accounted for about 52% of all property transactions last year, followed by Zuid-Nederland (21%), Oost-Nederland (19%), and Noord-Nederland (9%).

In the second quarter of 2016, property transactions rose by 23.6% to 50,315 units compared to the same period last year. The number of dwellings sold rose in all of the country’s major cities and municipalities.
By dwelling type:

  • For apartments, sales rose by 26.2% y-o-y to 14,621 units in Q2 2016
  • For terraced houses, sales rose by 24.6% y-o-y to 16,226 units in Q2 2016
  • For corner houses, sales rose by 18.3% y-o-y to 6,369 units in Q2 2016
  • For detached houses, sales rose by 25.4% y-o-y to 6,212 units in Q2 2016
  • For semi-detached houses, sales rose by 21.7% to 4,942 units over the same period

Mortgage interest rates continue to fall

Housing loan rates as of June 2016 were as follows:

  • Floating rate and interest rate fixation (IRF) up to 1 yr: 2.2%, down from 2.53% a year earlier
  • IRF 1-5 yrs: 2.36%, down from 2.68% in the previous year
  • IRF 5-10 yrs: 2.61%, down from 2.88% in the previous year
  • IRF 10 yrs or more: 3.06%, down from 3.26% in a year earlier

Netherlands interest rates housing loans

The average mortgage interest rate was 2.61% in June 2016, down from 3.37% two years ago. The 12-month, due partly to a fall in the Euribor rate is down to -0.056% in July 2016, from an average of 0.45% in 2014 and 0.54% in 2013.

When the global financial crisis exploded in Q3 2008, the ECB slashed the key 12-month Euribor rate from 4.81% in 2008 to 1.35% in 2010. However mortgage interest rates did not fully respond, falling only to 4.86% in 2009, and 4.52% in 2010.

Free market yields are good; new regulations are pushing up social rents

Netherlands house prices consumer prices

Gross rental yields in the small up-market decontrolled sector are good.  In Amsterdam, yields on apartments range from 4.7% to 5.8%. In The Hague, yields in range from 6.1% to 7.1%. In both areas, smaller apartments return higher yields than larger.

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 has a huge potential since it is the seat of government and most foreign embassies and international organizations in the country are located in The Hague. In addition, 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 a year.

In “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 it depends 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 2015, the rent increase for dwellings (including rent harmonization) in the Netherlands was 2.4%. In Amsterdam, the rent increase was 3.1% while it was 2.1% in The Hague.

In the social housing market, the maximum basic rent in Netherlands for rent-controlled dwellings was €710.68 (US$792.96) in 2016, a 1.6% rise from the previous year’s rent control limit at €699.48 (US$780). 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 (or almost 2.7 million rental homes) falls in this category, based on ABF Research and IVBN.

Netherlands rent increase

The maximum income allowed to live in rent-controlled dwellings was also raised from €34,229 (US$38,192) in 2013 to €34,678 (US$38,693) in 2014 and to €35,739 (US$38,761) in 2015. In theory, only individuals with incomes below the aforementioned limit are entitled to rent-controlled dwellings.

However in reality, a large number of high earners benefit from these rent-controlled properties. A solution to that problem was a new regulation, which makes rental rate hikes to be dependent on incomes, amended in March 2013. As of July 2015, the maximum annual rent increases for rent-controlled dwellings are as follows:

  • Households with incomes up to €34,329: ceiling of 1.5% + inflation
  • Households with incomes between €34,229 and €43,786: ceiling of 2% + inflation
  • Households with incomes above €43,786: ceiling of 4% + inflation

These percentages are computed over the basic rents.

Nationwide, the average monthly rent in the private housing sector rose by 6.2% y-o-y in Q1 2016, to €1,338 for a 100 square meter (sq. m.) house, according to research conducted by housing platform Pararius.

  • In Amsterdam, the average monthly rent for a 100 sq. m. property was over €2,234 in Q1 2016
  • In Rotterdam, the same property has an average rent of €1,350 per month over the same period
  • In Eindhoven, a 100-sq. m. house has an average monthly rent of €1,25o in Q1 2016

Over-mortgaged nation

Netherlands total residential mortgages

The Dutch residential mortgage market is large, compared to other developed countries.  Over the past decade, Dutch residential mortgage debt rose from 60% of GDP in 1998 to more than 103% of GDP in 2009, the highest increase (41%) among OECD countries from 2007 to 2011. During the past 3 years there was a slight contraction - in 2015, the residential mortgage market was 98.6% of GDP, from 104% of GDP in 2012, based on figures from the De Nederlandsche Bank (DNB). However, this contraction is unlikely to last, given strong housing demand.

The rise of mortgage debt is rooted in the government’s aggressive promotion of homeownership, offering generous mortgage subsidies, since the 1980s. 
The Dutch fiscal regime allows full tax deductibility of most mortgage interest payments at the marginal tax rate 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 generous Dutch mortgage tax relief, allowing homeowners to deduct the full cost of their mortgages from tax, is distorting the housing market, according to a recent IMF report. It means Dutch banks are faced with higher risks, because the large amount of tax relief encourages people to spend more on a house than they can actually afford.

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

  • In 2001 tax deductibility for mortgages used for non-housing consumption or investments and second-home purchases was removed.
  • 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 down payment.

Starting 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 will be trimmed slowly from 105% in 2013 (including the 2% stamp duty) to 100% in 2018.
  • Effective July 1, 2015, the mortgage guarantee (NHG) for mortgages has been reduced from €265,000 to €245,000.

Mortgage approvals surge to pre-crisis levels

In Q2 2016, new mortgage approvals rose to €30.35 billion, up by 14.8% from the same quarter the previous year, according to the DNB.

During the first half of 2016, the total mortgage debt amounted to €416.92 billion, 3.8% higher than in the first half of 2015.

Netherlands new housing loans approved

Most Dutch housing loans are fixed rate mortgages (FRM) for 5 years or more. However the shares of fixed and floating mortgages vary, depending on interest rates. When interest rates rapidly rose in 2007, households shifted to fixed rate mortgages.

As of Q2 2016, most new housing loans had 5-10 year interest rate fixations (IRFs), with a 52% share of total loans, followed by loans with IRF of 10 years or more (20%) and those with floating rate and IRF up to 1 year (15%). Loans with 1-5 year IRFs had a 12% share of the total housing loans.

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, with remarkable results. Owner-occupancy rose to 42% by 1980, then to 55% in 2005. 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.

Netherlands share mortgage irf

Homeowners receive favourable 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.

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

Out of the 57,703 total completed dwellings in 2011 (latest figure available in CBS), 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.

Modest economic growth, improving government finances

Netherlands gdp inflation

The Dutch economy is heavily dependent on foreign trade, with exports accounting for 83% of the country’s GDP. Because of this, the euro crisis strongly affected the Netherlands, sending its economy into a recession in 2011 which continued in 2012 and 2013, with economic contractions of 1.1% and 0.5%, respectively.

In 2015, the Dutch economy expanded by 1.9%, after GDP growth of 1% in 2014. In the second quarter of 2016, the Dutch economy grew by 2.3% from a year earlier, following a 1.5% annual growth in Q1 2016, according to CBS. It was the ninth consecutive quarter of robust growth, thanks to rising investment, domestic consumption, and exports.

The national debt continues to decline. During the recession, the government boosted the economy through stimulus programs and bank bailouts, resulting in a budget deficit of 5.6% of GDP in 2009, 5.1% of GDP in 2010 and 4.3% in 2011. As a result, the country’s debt rose to 71% of GDP in 2012, far higher than the permissible upper limit of 60% stipulated by the EU Stability Pact. In 2015, the gross public debt remains high at 65.1% of GDP, from 68.8% in 2014 and 68.6% in 2013.

On the other hand, the public budget deficit fell to 1.9% of GDP in 2015, from 2.3% of GDP in 2013 and 2014 and 4% of GDP in 2012. The deficit is projected to fall further to 1.5% this year and to 1.25% in 2017, while the gross public debt is expected to decline slightly to 64.75% of GDP this year and to 64% of GDP in 2017.

Consumer prices dropped 0.3% in July 2016 from the same period last year, from steady prices in the past three months, according to CBS. It was the first time since December 1987 that consumer prices are cheaper compared to a year ago. Overall inflation is expected at 0.25% this year, from 0.2% in 2015, 0.3% in 2014, 2.6% in 2013, 2.8% in 2012, and 2.5% in 2011, based on figures from the IMF.

In June 2016, the seasonally-adjusted nationwide unemployment stood at 6.1%, down from 6.9% a year earlier, according to CBS. Unemployment for men was 5.7% while it was 6.6% for women. In June 2016, there were 550,000 unemployed people in the country, down from 611,000 people in a year earlier.

Nationwide unemployment is projected at 6.4% this year and 6.1% in 2017, according to the European Commission.


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