Recovery of housing market continues thanks to lower interest rates and higher wages.

Number of housing transactions will increase by 0.5% in 2024 and by 3% in 2025

Recovering new-build property sales may encourage homeowner movement

Housing market scarcity increases due to strong growth in number of households

The housing market rebounded vigorously in the last quarter of 2023. House prices have been rising since last summer as higher wages and falling mortgage rates improve the affordability of homes. This improved affordability may cause house prices to rise further in a tight housing market. The number of homes for sale was much lower in the past quarter (-26%) compared to the fourth quarter of 2022. This gives buyers less choice, so houses are once again more likely to be sold above the asking price. In addition to this, scarcity is increasing further due to the strong growth in the number of single-person households. The cumulative effect of these factors has prompted ABN AMRO to adjust its price forecast upwards in the latest edition of the Housing Market Monitor: from 2.5% to 4% in 2024. In 2025, house prices are expected to rise by a further 3.5%.

Number of transactions rising again due to recovering new-build property sales

Even though demand for housing is growing robustly, the number of transactions is still under pressure. However, various signs indicate that the falling transaction numbers have bottomed out. Price developments and lower interest ratesare making homeowners who want to move more willing to buy a new home before they've sold the old one.As a result, the average selling period has been dropping for three successive quarters: over the last three months of 2023, houses were sold within an average of 30 days. In light of this, ABN AMRO is also adjusting its forecasts for transactions upwards: from -2.5% to +0.5% in 2024. In 2025, transactions are expected to rise by 3%. The increase will remain limited this year, as relatively few new-build properties are being completed. However, the new lending standards mean that in 2024 people can borrow more for houses with good energy labels. This includes new-build properties by definition. It may give the construction and sale of these homes a boost, increasing homeowner movement in the market.

First-time buyers still active despite growing scarcity on housing market

Due to the drop in the number of transactions and the rising mortgage rates, fewer mortgages were provided last year. ABN AMRO is expecting the fourth quarter of 2023 to be a possible sign of things to come this year. Growth was achieved in this quarter for the first time since early 2022: the number of mortgage applications was almost 15% higher than in the last quarter of 2022. The share of applications from first-time buyers in particular rose sharply last year due to the refinancing market drying up because of high interest rates. Despite the tight market, young buyers are expected to remain active this year as well. 'Tax-related changes and the easing of lending standards have improved the position of first-time buyers and single-person households on the housing market. The NHG mortgage limit and the first-time buyer exemption have increased this year. Thanks to the latter measure, the threshold for transfer tax has also increased,' explains Bram Vendel, Housing Market Economist at ABN AMRO. 'Furthermore, first-time buyers can still make use of a family mortgage after the abolishment of the gift tax exemption, also known as the 'jubelton' in Dutch. Currently, about one in six households in the Netherlands has a family mortgage. The abolishment of the 'jubelton' will probably really boost the popularity of this type of mortgage.'

The full report can be downloaded here

(in Dutch only).

Author

Bram Vendel

Economist

bram.vendel@nl.abnamro.com

(C) 2024 Electronic News Publishing, source ENP Newswire