Is there a housing bubble in the Netherlands?

A housing bubble describes the situation in which the value of something is very far ahead of the actual value. Unfortunately it is only possible to say with certainty afterwards whether something is a bubble or not. House prices depend on a large number of factors, such as the location of the house, the condition of the house and the associated maintenance and how well the economy is doing.

Attractive areas

The prices of houses have risen sharply in recent years in some areas, such as Amsterdam and Rotterdam. Houses in Rotterdam are the most expensive of all the big cities in the Netherlands. In the first quarter of 2018, house prices there went up by 15%. Prices in Amsterdam increased by 12%. Nationally, the average increase was 9%. This is also a significant increase historically. Apartments rose the fastest in price, followed by terraced houses and detached houses. According to CBS / Land Registry, house prices in February 2018 were on average 9.5% higher than in the same month a year earlier. The price level is now just below the level before the financial crisis. There are, however, major differences between the regions.

Economy and crisis

The recent rise in house prices comes after a sharp fall in house prices in the years following the financial crisis that started in 2008. The fall in house prices was caused by a total lack of consumer confidence. There was uncertainty about job guarantees and pessimism led to an abrupt halt in the housing market. The number of sales decreased by 30 to 45%, depending on the region. A significant price decrease was the result. Homes that had to be sold (divorce, death, or new job elsewhere in the country) were sold with significant discounts, up to 30% or more. Since 2015, sentiment seems to have returned and the prices of homes are rising sharply.

Expectation of house prices

It can be stated with certainty that house prices will continue to face price fluctuations in the future. So there is also a chance that house prices will fall again. However, the housing market does not seem to us to be a bubble where prices can fall by more than 80%. Lessons from the past have taught us that an investment in houses has been a good investment, but returns from the past unfortunately offer no guarantee for the future.

Rent or buy?

We think that investing in an owner-occupied home is a good investment in the long term. After the repayment of the mortgage, the housing costs fall. With a rental house the monthly rental costs always go through. In addition, the rents are indexed annually and are usually increased as a result of this. Unfortunately, we cannot predict whether house prices will continue to rise in the long term. Read more about renting or buying on our website.