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House sales rising, prices stabilising

Economic Comment

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Statistics Netherlands, in collaboration with the Dutch Land Registry, has just published the number of transactions and the prices of second-hand houses in the Netherlands for February 2014. Sales again surprised on the upside and prices are consequently bottoming out. 

Sales stabilising at a high level

The Land Registry recorded the highest February results for existing homes sales since 2008: 10,030 houses were sold. For January too, sales were the highest for that month in the past five years. The strong year-on-year rise does not give a true reflection of recent developments, because a relatively large number of households opted to buy a house in the last quarter of 2012, in order to benefit from tax-favourable mortgage arrangements. As a result sales numbers were very low in the first quarter of last year. The seasonally corrected series shows that house sales were fairly stable during the past three months, at about 11,300. Momentum (the three-month average of the seasonally corrected series) increased further in February of this year (Figure 1).

During the course of this year, we expect to see a gradual rise in the number of houses sold. Accordingly, this should mean a year-on-year increase in transactions for the first time since 2006. Theoretically, if sales numbers (corrected for seasonal effects) remain at the February level, a total of 135,000 homes will change hands in 2014. Even if the high numbers of the past three months were to be only temporary, and sales in March were to drop considerably and rise only modestly thereafter, the total would still exceed 129,000 for the year as a whole. Thus it seems 2014 is set to become the best year since 2008. A rise in sales of between 15,000 and 20,000 compared to 2013 would be a strong performance. At the same time, such a rise will compensate only slightly for the decline that has taken place since the peak of 2006. In our outlook, we assume for a number of reasons that we will not return to pre-crisis sales levels. The anticipated number of sales for this year is still relatively low. 

Decline in supply of houses for sale

The rise in sales implies a reduction of unsold housing stock. In our last Dutch Housing Market Quarterly, we explained that the number of houses on the market could go either up or down this year. After all, the stabilisation of the housing market could induce a number of potential vendors to put their house up for sale. In recent months we have seen that so far, improved sales have resulted in a slight further decline in supply (Figure 2). Accordingly, the bargaining position has shifted marginally in favour of vendors; yet for the time being, it is still mainly a buyers’ market. 

Figure 1: Sales up, price stable
Figure 1: Sales up, price stableSource: CBS, Rabobank
Figure 2: Further decline in supply
Figure 2: Further decline in supplySource: Huizenzoeker.nl  

Prices stabilise

The existing homes price index (PKB index) remained equal in February 2014, compared to January. This decline follows a 0.4% rise in January this year and +0.6% in December 2013. Momentum is thus positive: +0.5% compared to the previous three months, and prices have not fallen on balance in the past eight months. This flat price trend conceals the fact that prices are still declining on a year-on-year basis and that the decline has even accelerated compared to January. If prices remain unchanged during the coming month, the first y-o-y rise can be recorded in May this year. Since such a rise is generally reported in the news, this should give an extra boost to confidence in the housing market.

A rise in sales numbers and stabilisation of prices in the past year will be a very welcome development after years of a downward spiral. 

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