The housing market is turning around, say housing market economists at ABN Amro. Home purchases are declining, more homes are for sale, and home prices are falling. House prices are expected to fall by 2.5 percent in 2023.

The reason for the lower prices is the decline in purchasing power, caused in part by high inflation, rising mortgage rates and the economic downturn.

Current quarterly figures from the real estate association NVM showed last week that a different wind was blowing on the housing market. House prices fell 5.8 percent in the third quarter compared to the second quarter.

At ABN Amro, they think price declines will be the trend for the coming year. The previously estimated 2.5 percent increase has been adjusted to a 2.5 percent decrease.

Big cities

In addition, according to housing economists, the price correction is occurring relatively quickly compared to earlier phases of the economic downturn. Price growth is slowing down rapidly, especially in the four major cities (Amsterdam, Rotterdam, Utrecht and The Hague). The lower prices can be beneficial for home purchases as the number of transactions has fallen sharply recently.

In an estimate last month, Rabobank expected house prices to rise in 2023, although the bank predicted a trend reversal later in the year.

‘Unlocked’

ABN Amro does not expect mortgage rates to rise further. The bottom line is that homeowners have few problems with rising interest rates: the majority have fixed mortgage interest rates for a longer period of time and have also built up a lot of equity in recent years. That is also the big difference to the housing market crisis ten years ago, when falling prices and residual debts brought the housing market to a complete standstill.

“This time, the price adjustment follows the transaction decline much more quickly, keeping transactions somewhat stable and preventing the housing market from closing,” says Philip Bokeloh, housing market economist at ABN Amro.

Falling house prices are favorable for first-time buyers on the housing market, but in combination with housing shortages and higher mortgage interest rates, they do not bring much relief for the time being.