New building plans, interest rates, changes in the law - there is a lot going on in the housing market. But what effect do experts believe this will have on house prices? In this blog post, we look ahead with an expectation for the housing market in 2022.
1. New building 2022
Build, build, build! It must become the solution to the imbalance in the housing market. According to experts, the most important reason for the rising house prices in recent years is the lagging behind of the new-build production. Due to the fact that hardly any new houses were built during the economic crisis, the shortage has now risen to about 300,000. In order to make up this shortfall, the central government is releasing €1 billion this year to stimulate housing construction over the next 10 years. The focus of the new developments will mainly be on realising affordable starter homes in urban areas.
Yet the question is whether extra money for housing production is an appropriate short-term response. In most cases, the budget is not so much the problem for new-build projects, but rather the available land and the lead time for permits. The goal of building 100,000 homes per year is therefore likely to be difficult, and it is expected to take years to catch up.
2. Expected interest rates 2022
As a counterpoint to building, building, building, the DNB states that it is not the housing shortage, but rather the large amount of finance available that is causing house prices to rise. Data from the past 25 years show that the maximum loan amount is much more in line with the development of house prices than the housing shortage. After all, there has always been a housing shortage in the Netherlands to some extent since the Second World War, but house prices have only recently risen explosively after the average mortgage interest rate was at a historically low point. The interest rate therefore seems to play an important role for the expectations of 2022.
Interest rates in 2022 will be influenced mainly by corona and inflation, say economists at ABN AMRO. In the Eurozone, inflation has been persistent for some time, prompting the ECB to intervene by raising interest rates. On the other hand, the ECB is reluctant to do so because of the new omikron variant. Due to new lock-downs, economic recovery is still uncertain for many countries, so the expected interest rate increase will be limited. For consumers, this will result in a small increase of approximately 0.1 to 0.2 percent for mortgages.
3. Legislative amendments to the housing market 2022
Also in 2022, a number of new legislative changes will take place that may have an effect on house prices. The complete overview of the changes can be found on the website of the Government. We will briefly explain a number of important ones.
3.1 Buy-out protection
In order to protect starters, municipalities may introduce buy-out protection in (certain areas). In a number of municipalities this regulation is already in force, or will be introduced shortly, such as Amsterdam, Rotterdam, The Hague and Haarlem. The measures will apply to homes up to a set WOZ value, in order to keep out investors and thus make it easier for people to buy their own homes.
The effect of this measure can fall in two directions. On the one hand, the supply of homes for first-time buyers will be relatively larger because these homes will no longer be snapped up by investors. On the other hand, it is true that fewer rental homes can be built for first-time buyers or existing tenants. The shortage of rental homes may force these groups to try their luck on the owner-occupier market (possibly with friends). Ultimately, the absolute scarcity for this group will increase even further. It is therefore likely that this scheme will cause a 'waterbed effect' by failing to add new starter homes to the total supply.
3.2 Increase in NHG cost limit
Due to the rising house prices in recent years, more and more prospective buyers risk falling outside the NHG scheme. To prevent this, the NHG cost limit will rise from €325,000 to €355,000 in 2022. If any energy-saving measures are also financed, the cost limit will rise to a maximum of €376,300.
The effect of the measure on house prices will be small. The average house price in the Netherlands is already €400,000, making an NHG mortgage often no longer feasible.
4. Forecast housing market 2022
First of all, predicting house prices is very complicated at the moment. Banks and mortgage lenders still make occasional predictions, but in most cases these have to be adjusted within a few months. As things stand, the rise in house prices looks set to continue this year. Only in a scenario where interest rates rise faster than expected will house prices fall due to reduced borrowing capacity.
Questions or comments about this blog article, or suggestions for other topics, please feel free to contact Eerlijk Bieden.