First-time buyers hardly benefiting from easing of housing market measures

Although more homes were sold in the first two months of this year, this is likely to be just a temporary increase. Many first-time buyers waited for the new year to purchase a home in order to benefit from the lower property transfer tax. Income prospects are expected to worsen in response to growing unemployment when the government begins to wind down its support measures. And with the prolonged nitrogen crisis impeding new builds, homeowner movement and sales of existing homes are also under pressure. On top of that, the favourable effects of low mortgage interest rates will wane when they bottom out. In light of this, ABN AMRO expects house prices to increase less strongly next year and the number of homes sold to fall by 10 percent this year and 5 percent in 2022.

February price increase (10.4 percent) highest in twenty years

ABN AMRO is convinced that the 2.5 percent house price increase in January and 1.1 percent in February compared to the previous month was driven by the measures implemented at the start of the year. On 1 January, the property transfer tax was cut, and the Dutch National Mortgage Guarantee threshold and the maximum mortgage amount for partners based on their income and for first-time buyers with student debt went up. The demand for houses rose, pushing prices up too. As a result, the house price index was 10.4 percent higher in February than in the same month last year – the steepest price rise in twenty years. According to ABN AMRO, first-time buyers will hardly benefit from the lower transfer tax in the long run. As house prices rise, their chances of buying a home will actually shrink. Existing homeowners, on the other hand, will see the value of their properties increase.

New builds vital to dampen overheated housing market

New builds are vital to help first-time buyers and others seeking accommodation to get ahead, but that is not easy, ABN AMRO points out. "Given the limited number of building permits and the prolonged nitrogen crisis, the number of new build homes will remain low in the coming years. We expect the shortage of new builds combined with strong demand to contribute to the continuing upward price trend in the housing market. On balance, the relaxation of measures in the overheated housing market appears to be mainly benefiting existing homeowners and having the opposite effect for first-time buyers," says Philip Bokeloh, Housing Market Economist at ABN AMRO's Group Economics. "As the movement of existing homeowners to newbuild homes is restricted, the number of transactions around existing homes is also being slowed. We expect the number of homes sold to fall by 10 percent in 2021 and by 5 percent next year, partly due to the lack of newbuild."

The full report can be downloaded here (in Dutch only).