Introduction to the Housing Market in the Netherlands

This article will not contain:

Fortune telling about the rise of fall of housing prices
Investment advice
A day to day update on the latest prices

This article will help you with:

An introduction to the Dutch housing market
Understanding the development of prices over the last years

Dutch housing prices in the last 20 years

The price of houses in the Netherlands have developed of the past 20 years. The last peak was in 2008.

Source: CBS

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:

Interest rates
Housing shortage
Tax benefits
Borrowing standards

1. The influence of interest rates on the house prices in the Netherlands

One important contributing factor to the housing prices are interest rates.

Source: https://www.euribor-rates.eu/

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.

2. Housing shortage

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.

Housing shortage - Demand side

The demand for houses rises due to:

Growing number of divorces
Elderly moving less to nursing homes
Immigration

Housing shortage - Supply side

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:

Unavailability of locations designated for construction. Either because it is not physically available or not legally appointed as such.
Environmental concerns about surroundings or constrains because of nitrogen disposition
High labor cost and cost of materials

3. Tax benefits

Deductible interest rates

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.

The Dutch 'Jubelton'

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.

4. Borrowing standards

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: