House prices expected to rise by 8.5 per cent in 2024 and 7 per cent in 2025

• Pay rises and falling mortgage rates are pushing house prices further up

• Transaction numbers continue to climb this year, stabilisation expected in 2025

• Disposals of rental apartments spell opportunity, especially for first-time buyers

Housing market sentiment continues to strengthen

Confidence among would-be buyers in the housing market has grown further in the third quarter of 2024, putting upward pressure on house prices. This is reflected, for example, in the price index for existing homes, which in August was up 11.2 per cent on the year before. Further pay rises and falling mortgage rates are pushing house prices up. Meanwhile, buyers have more financial scope thanks to higher mortgage borrowing ceilings. As a consequence, competition in the housing market is growing, with more bids exceeding the asking price. These developments have led ABN AMRO to raise its price forecasts in its latest Housing Market Monitor from +7.5 to +8.5 per cent in 2024 and from +5 to +7 per cent in 2025.

Transaction numbers up for the second quarter running

With house prices touching new record highs, existing homeowners are making their first tentative moves to re-enter the market, alongside young and first-time buyers. This has led to a further surge in the number of transactions, similar to that seen in the previous quarter. Consequently, ABN AMRO is also upwardly adjusting its forecast for the transaction number trend for next year from +10 to +12 per cent. On top of all this, prices of existing properties are rising faster than newbuild prices. Along with lower mortgage rates, this is making newbuild homes more attractive again, which means that more families will be moving into newbuild homes and selling their existing homes. On balance, therefore, the number of transactions in the existing housing stock should also increase. That said, ABN AMRO expects this uptrend to level off in 2025, as the move to newbuild grinds to a halt in the course of the year for lack of sufficient newbuild completions.

New home construction to remain problematic in years ahead

Although the number of building permits granted is on the rise again, there is a limit to what we can expect, ABN AMRO points out.

“The number of newbuild transactions next year will be largely determined by the number of new houses that get completed. Until now, construction of around 90,000 homes is under way, with completions scheduled one to two years from now. This means the government is still a very long way from its target of 100,000 new homes a year,” says Philip Bokeloh, Housing Market Economist at ABN AMRO. “On the positive side, more existing homes are changing ownership as investors increasingly sell off their rental property. This has led to a larger number of modestly priced homes with a low energy label – usually apartments –coming onto the market. Especially in the large cities, we’re seeing the share of apartments in total housing transactions increase. This spells opportunity for first-time buyers in particular, provided they’re prepared to renovate these often older homes and make them more sustainable.”