Netherlands

The Netherlands’ house price boom accelerates

Lalaine C. Delmendo

The house price boom in Holland continues to strengthen, amidst robust demand, coupled with chronic supply shortages.

In Amsterdam, the capital, the price of existing homes rose by 11.5% during 2021 (9.4% inflation-adjusted), to an average of €569,890 (US$627,865), according to Statistics Netherlands (CBS) - the highest price rise ever recorded and the eighth consecutive year of annual rises. Nationally, the average house price rose by 15.6% (13.4% inflation-adjusted) to €386,714 (US$428,181) in 2021 from a year earlier, following y-o-y rises of 8.6% in 2020 and 7.2% in 2019.

Source: Statline Netherlands

All property types rose in price, nationwide, during 2021.

  • Apartment prices rose by 15.3% (13.1% inflation-adjusted), to an average of €341,061 (US$377,618), sharply up from the prior year’s 8.2% increase.
  • Terraced house prices rose by 15.5% (13.3% inflation-adjusted), to an average of €354,068 (US$392,019), following a y-o-y increase of 8.2% in 2020.
  • Detached house prices surged 17.1% (14.9% inflation-adjusted), to an average of €571,721 (US$633,001), sharply up from the prior year’s 9.7% growth.
  • Semi-detached house prices increased 14.1% (11.9% inflation-adjusted), to an average of €401,935 (US$445,016), up from a y-o-y rise of 8.6% in 2020.
  • Corner houses saw price increases of 14.7% (12.5% inflation-adjusted), to an average of €368,441 (US$407,932), up from the prior year’s 8.8% rise.

After a housing boom lasting almost 15 years, 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% in the past two years.

HOUSE PRICES, ANNUAL CHANGE (%)

Year Nominal Inflation-adjusted
2008 1.70 -0.24
2009 -5.69 -6.73
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 8.38 7.33
2021 20.33 13.83
Sources: Statistics Netherlands (CBS), Global Property Guide

Residential construction activity weak

In 2021, dwelling completions in the country fell by 1.9% to 68,633 units, following a 2.2% decline in 2020, according to Statistics Netherlands.

From an annual average of 76,300 units from 2000 to 2009, completions dropped sharply to an average of 59,000 units annually from 2010 to 2021 - 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 two years weakened residential construction further.

Netherlands dwelling completions

Residential construction activity remains weak. In 2021, dwelling completions in the country fell by 1.9% to 68,633 units, following a 2.2% decline in 2020, according to Statistics Netherlands. Total dwelling stock grew by about 1% to 8.04 million units as of end-2021.

“The Dutch construction sector is facing severe labor and material shortages. Growth in the number of building permits also lags far behind the oft-stated ambition of building 100,000 homes a year. Without policy changes to boost housing construction, it is doubtful whether we will ever achieve this target,” said Rabobank Economic Research.

The continuous decline in supply is now weighing on the number of sales. During 2021, the total number of dwellings sold in The Netherlands fell by 4% to 226,087 units from a year earlier but still up 3.4% from two years ago, according to CBS.

“Demand for housing is high, partly due to low interest rates, while supply is inadequate. In fact, historically, when set against the total number of owner-occupied homes, there have never been so few houses for sale,” added Rabobank.

The Dutch housing market is expected to continue growing strongly this year. “In 2022, Dutch house prices are expected to climb by 12.4 percent, followed by a further increase of 3.2 percent in 2023,” predicts Rabobank Economic Research.

The Dutch economy grew by 4.8% in 2021 from a year earlier, in contrast to a 3.8% contraction in 2020, thanks to a rebound in household consumption and exports, as well as public consumption and investments, based on figures from Statistics Netherlands. The economy is projected to grow by a modest 3.4% in 2022, according to Fitch Ratings.

Strong house price rises in most major cities and provinces!

House prices continue to rise strongly in almost all of Netherlands’ major provinces and cities during 2021. According to Statistics Netherlands:

  • In Amsterdam, existing home prices rose strongly by 11.5% during 2021 to an average of €569,890 (US$627,865) – the highest level ever recorded. It was the eighth consecutive year of annual rises.
  • In Rotterdam, existing home prices soared 18.4% during 2021 to an average of €364,018 (US$401,050), following y-o-y rises of 8.6% in 2020 and 10.2% in 2019.
  • In Groningen, existing home prices rose strongly by 15.5% during 2021 to an average of €321,804 (US$354,541), following annual increases of 9.9% in 2020 and 7% in 2019.
  • In The Hague, existing home prices surged 15.7% during 2021 to an average of €411,717 (US$453,601), after increasing by 9.5% in 2020 and 6.5% in 2019.
  • In Utrecht, house prices rose by a huge 15.8% during 2021 to an average of €469,949 (US$517,757) – its eighth straight year of annual increases.

Netherlands house price index

The country’s major provinces:

  • In Zuid-Holland, the country’s most populous province, house prices rose by 15.1% y-o-y in 2021 to an average of €384,214 (US$423,300), an acceleration from annual increases of 9.3% in 2020 and 8.8% in 2019.
  • In Noord-Holland house prices rose by 15.5% during 2021 to an average of €490,225 (US$540,096), more than double the y-o-y increases of 7% in 2020 and 6.1% in 2019.
  • In Noord-Brabant the price of existing homes rose by 13.9% during 2021 to an average of €385,036 (US$424,206), up from y-o-y rises of 8.9% and 6.8% in the past two years
  • In Gelderland house prices rose by a huge 17.2% during 2021 to an average of €379,346 (US$417,937), sharply up from y-o-y increases of 9.3% in 2020 and 7.4% in 2019.

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.

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 2019) Global pandemic (Q1 2020-Q4 2021)
Netherlands 104.4 4.7 15.3 3.8 -15.6 39.8 27.3
Groningen 100.1 8.7 16.9 2.9 -12.7 36.2 32.3
Zuid-Holland 98.9 3.3 16.1 2.2 -10.5 44.7 25.7
Noord-Brabant 107.9 5.8 13.6 3.8 -20.4 32.7 25.2
Amsterdam 131.6 -6.5 5.6 12.1 -17.7 77.4 20.0
Rotterdam 109.4 1.9 21.2 6.7 -11.9 61.8 26.5
Source: Statistics Netherlands, Global Property Guide

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

However 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% in the past two years.

Demand remains robust

During 2021, the total number of dwellings sold in The Netherlands fell slightly - by 4% to 226,087 units - but still up 3.4% from two years ago, according to CBS.

Netherlands dwellings sold

By dwelling type:

  • Apartment sales fell slightly by 0.3% y-o-y to 58,430 units, after rising by 6.5% in the prior year.
  • Terraced house sales fell by 4.3% y-o-y to 75,896 units, in contrast to a growth of 5.7% in 2020.
  • Detached house sales fell by 4.3% y-o-y to 31,786 units, after a huge growth of 11.5% in 2020
  • Semi-detached sales dropped 5% y-o-y to 23,971 units, from an increase of 7.4% in the prior year.
  • Corner house sales fell by 3.4% y-o-y to 30,381 units, from a rise of 7% in 2020.

“This uptick is most likely the result of the abolition of stamp duty for buyers under-35,” said Rabobank. “It appears that many young adults who exchanged contracts on a property in the second half of 2020 probably decided to delay completion until the new year to avoid having to pay stamp duty.”

Mortgage interest rates continue to fall

The average interest rate for new housing loans was 1.65% in December 2021, down from 1.84% a year earlier and 2% two years ago.

For new housing loans:

  • Floating rate and interest rate fixation (IRF) up to 1 yr: 1.62% in December 2021, slightly down from 1.68% a year earlier
  • IRF 1-5 yrs: 1.65% in December 2021, down from 1.73% in the previous year
  • IRF 5-10 yrs: 1.53% in December 2021, down from 1.74% in the previous year
  • IRF 10 yrs or more: 1.73% in December 2021, down from 1.99% in a year earlier

Netherlands interest rates housing loans

For outstanding housing loans, the average interest rate was 2.34% in December 2021, down from 2.61% a year earlier.

  • Original maturity of less than or equal to 1 yr: 1.87% in December 2021, down from 2.03% in the previous year
  • Original maturity of 1-5 yrs: 2.04% in December 2021, down from 2.16% in the previous year
  • Original maturity of more than 5 yrs: 2.34% in December 2021, down from 2.61% in a year earlier

Free market yields are good

Gross rental yields in the small up-market decontrolled sector are good.

  • In Amsterdam, yields on apartments range from 3.7% to 5.3%, based on research conducted by Global Property Guide.
  • In The Hague, yields are around 5.6% to 6.4%.

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.

Netherlands hpi vs cpi

The Hague is a less expensive city to buy in, and has 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. Before the pandemic, The Netherlands welcomes about 1.2 million tourists every year.

Rents continue to rise modestly

The average monthly rent in the private liberalized housing sector rose by a modest 2.2% in 2021 from a year earlier, from annual rises of 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 just 0.8% last year, after y-o-y increases of 2.9% in 2020, 2.5% in 2019, and 2.3% in 2018. In Amsterdam, the rent increase was 1.1% while it was 0.8% in The Hague, and 1.2% in Rotterdam.

Netherlands rent increase dwellings

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 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 Netherlands for rent-controlled dwellings is currently at €763.47 (US$839) per month, up from the rent control limit of €752.32 (US$827) in 2021 and €737.14 (US$810) 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 80% of their vacant social houses every year to households with income of up to €40,765 (US$44,788) – the threshold for 2022. The associations may let 10% of their social housing to households with an income between €40,765 (US$44,788) and €45,014 (US$49,457) and the remaining 10% to those with income above €45,014 (US$49,457).

Mortgage market continues to shrink

From 68% of GDP in 2003, the Dutch mortgage market expanded to almost 84% of GDP in 2009, based on the Global Property Guide estimates. However, during the past decade there has been a sharp contraction in the residential mortgage market - to 64.8% of GDP in 2021, mainly due to the introduction of new reforms to discourage borrowing.

Netherlands housiing loans

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”).

Netherlands loans housing purchase

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, or 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 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 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$) to €245,000 (US$), but was again increased annually in the past four years. In 2022, the maximum values are:
    • €355,000 (US$390,000) for existing and newly built properties without energy-saving features, and;
    • €376,300 (US$413,700) for properties with energy-saving features.

Netherlands new housing loans approved

In 2021, total outstanding housing loans rose by a modest 2.1% from a year earlier at €546.83 billion (US$600.83 billion), according to DNB. But new housing loans drawn were up strongly by 13.8% y-o-y in December 2021.

Netherlands Share Mortgage initial rate fixiation

Almost 82% of new housing loans were fixed rate mortgages (FRM) of 5 years or more in 2021, despite very low interest rates.

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 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.

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.

Dutch economy recovering

The Dutch economy grew by 4.8% in 2021 from a year earlier, buoyed by a rebound in household consumption and exports, as well as public consumption and investments, based on figures from Statistics Netherlands. However it was slower than most of its neighboring countries and lower than the EU average of 5.2%.

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 3.8% - its worst showing in recent history.

Netherlands gdp inflation

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

The economy is projected to grow by a modest 3.4% in 2022, according to Fitch Ratings.

The Dutch government recorded a budget deficit of around 6% of GDP last year, up from a 4.3% shortfall in 2020 and in sharp contrast to a surplus of 1.8% in 2019. It is now twice the allowable limit under the EU rules.

Gross public debt was estimated to have risen to about 57.7% of GDP in 2021, up from 54.5% in 2020 and 48.7% in 2019. Yet it remains slightly below the permissible upper limit of 60% stipulated by the EU Stability Pact.

Inflation stood at 6.2% in February 2022, sharply up from the previous year’s 1.8%, mainly due to the surge in energy prices. Inflation averaged just 1.6% from 2011 to 2021.

Unemployment fell to 3.6% in January, the lowest level since 2003 – the first year for which monthly figures became available. Joblessness averaged 5.3% from 2011 to 2021.


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Netherlands - More data and information