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The price of houses in the Netherlands have developed of the past 20 years. The last peak was in 2008.
The average purchase price back then was 255,000. In the 5 consecutive years prices dropped to 213,000 euro in 2013. In 2021 the average purchase price was 387,000.
Are we in a bubble?
Fair question, but the truth is: we do not know.
Housing prices are mainly by these factors:
One important contributing factor to the housing prices are interest rates.
As you can see in the graph, interest rates (12-months EURIBOR) are very low since the economic crisis in 2008. Other than the period before, the rates over the 10 years, were consistently low. Therefore, the effect of the low rates or even bigger on the house prices.
According to NVM, the association for estate agents in the Netherlands, there is a 33% decrease in number of houses for sale in 2021. The Dutch Ministry of the Interior and Kingdom Relations estimated in 2021 that demand exceeds supply by 279,000 houses.
The demand for houses rises due to:
It sounds like a great business opportunity to start building today. Borrowing capital is cheap and there is a lot of demand for housing. Nonetheless, that is not what is happening.
The following factors limit the output:
The Dutch government took certain measures that make borrowing financially attractive. A big contributor is that interest rates on mortgage loans are tax-deductible.
This tax exemption is being limited and continue to be eliminated completely in the coming years. Every year the possibility of deduction is less than the year before.
Further reduction of these benefits is one of the solutions to normalize the situation.
In addition, family members can gift up to 100,000 euro tax-free to a relative, if that money is used for buying a home. Mostly children of rich parents can therefore spend more on buying a house, than they would under normal circumstances.
This practice of parents giving tax exempted, is called 'Jubelton'. A Dutch wordplay.
Dutch homes buyers are allowed to finance the full value of their property with a mortgage loan. These borrowing standards are different to those in other countries. Therefor, buyers can pay increasingly more for their homes.
In most other countries, buyers pay 10-20% of the sale out of pocket. Maybe it would be more healthy to the market if buyers can finance up to 90% of the value of a property.
More on selling property in the Netherlands: