The Housing Market in Major Dutch Cities

Abstract

The Dutch housing market is recovering strongly from the crisis, with considerable regional differences. Major cities such as Amsterdam, The Hague, Utrecht and Rotterdam, are witnessing stronger house price rises than the rest of the Netherlands. Despite signs of overheating in the large urban housing markets, there is no credit-driven bubble in cities as yet. Spiraling house prices in the cities are mainly attributable to scarcity pricing: ongoing migration to the cities is spurring demand for urban housing and supply is failing to keep pace. The result is a shortage of affordable housing, particularly in the non-rent regulated rental sector, putting middle-income earners in a tight spot. Supply in the non-rent regulated sector is growing slowly due to planning restrictions on new-build developments, a lack of planning and construction capacity, and the absence of effective incentives for mainly municipalities. The government should encourage municipalities to increase supply in the non-rent regulated sector, and mortgage interest deductibility should be lowered further to level the playing field between buying and renting.

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