The housing market is in constant flux and many people wonder what will happen with the interest rates that rise, the inflation rises and what impact the war in Ukraine will have on the housing market. Will these factors slow the buoyant house price rise? Or will house prices continue to rise?
Despite the fact that mortgage interest rates have risen, interest rates remain historically low. The rise in interest rates is related to inflation that has risen sharply over the past year. Higher energy prices were the cause of the rising inflation. When inflation increases, the European Central Bank (ECB) has to take measures. As a result, the ECB raised interest rates for the banks. As risk premiums in the financial markets have risen since the war in Ukraine, ABN AMRO bank expects mortgage interest rates to rise further this year.
Despite rising mortgage rates and inflation, Rabobank expects house prices to rise further this year as well. On the other hand, house price growth is expected to slow down in the coming years.
Another aspect that influences house prices is the rising demand for housing. The population in the Netherlands continues to grow. In 2035, our country is expected to have 18.3 million inhabitants. Large and medium-sized cities in particular will grow, as will several suburbs surrounding the major cities. Amsterdam will have the most inhabitants and is expected to grow by more than 150,000 until 2035. Various other municipalities around the major cities are also growing, such as Almere and Haarlemmermeer. Because of their new construction, these municipalities receive many young couples from the big city. That is a growth of almost 20 percent compared to 2019.
Despite the fact that the supply for new construction is not increasing and the demand for housing continues to rise, there is still one aspect that influences the increasing demand for owner-occupied housing. Research from the Regional Population and Household Forecast by the Netherlands Environmental Assessment Agency (PBL) and Statistics Netherlands (CBS) shows that many more people are going to live alone.
In 2035 it is expected that half a million more people will live in the Netherlands alone than now. By then, nearly 20 percent of the population will live alone, compared to more than 17 percent now. In the four major cities, the percentage of single people is already high (mainly due to the influx of students and working young people) and will continue to increase with the aging of the population.
In addition, we see that more and more highly skilled migrants choose to move to the Netherlands. The tension on the labor market is unprecedentedly high and there is no prospect of any change for the time being. The Netherlands appears to be very popular among highly skilled migrants, not only because of the supply on the labor market, but also because almost all Dutch people have a good command of the English language. Expats feel at home here.
We expect house price growth to pick up slightly again this year (2022) and then stabilize. House prices will not fall substantially in the short term, as there is more demand than supply to buy. Thinking of a housing shortage of more than 300,000 and this will not decrease in the coming years.