RaboResearch - Economic Research

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House prices rising, unemployment declining in the Netherlands

Economic Update

  • The Dutch economy grew by 3.1% in 2017
  • On the owner-occupied housing market price rises are heating up
  • There are fewer discouraged workers as the unemployment rate is dropping faster than expected

The year is off to a good start, with optimistic consumers and producers. In fact, confidence among the latter group was higher in February than ever before. The economic growth is also noticeable on the labour market, where unemployment declined further in January. On the owner-occupied housing market the average home became 8.8% more expensive on average than in the same month a year earlier.

Housing market rumbles on

In 2017 the Dutch house price index rose by 7.6%, as we predicted last summer. This substantial increase reflects the very high demand for owner-occupied homes in the wake of declining unemployment and the strong economic rebound. For 2018 we expect even further price increases, by an average of 8% y/y, as there are hardly any signs of demand slowing down: employment is expected to keep rising, while confidence among consumers in the economy and the housing market remains firmly above their long-run average (see figure 1). Meanwhile production of new homes is struggling to keep pace with demand, in part due to the scarcity of construction workers.

The year-on-year price increases in the past three months of 2017 had already heated up to 8.2% before prices accelerated further in January, when the house price index rose by 8.8% (see figure 2). At this pace it will be just a few more months until the Dutch housing market will see prices rise beyond their 2008 peak. This may be bad news for potential buyers. However, it will be welcomed by many homeowners, particularly in the west of the country, where in recent years prices have increased more slowly and where there are still many homeowners whose mortgages are ‘under water’.

Figure 1: Confidence almost unshakable
Figure 1: Confidence almost unshakableSource: Statistics Netherlands (CBS)
Figure 2: House prices going up, up, and away
Figure 2: House prices going up, up, and awaySource: Statistics Netherlands (CBS)

In the past quarters we also saw a strong resurgence in sales in regions such as Flevoland, Gelderland and Noord-Brabant. We feel that provinces outside of the major cities will continue to make a comeback in 2018, offsetting stagnating or even declining sales in, for example, Noord-Holland and Utrecht. Therefore we estimate a total of 250,000 sales in 2018, only slightly more than 2017’s 242,000 transactions. It will be interesting to see in the coming months if 2018 will indeed break the record set in 2017.

Unemployment declining further

The strong economic growth in 2017, in which the Netherlands tied with Spain for the title of Eurozone’s top performer, also seems to give hope to those without a job and that have stopped looking for one. The number of discouraged workers totalled 32,000 less people in the last quarter of 2017, compared to a year earlier (see figure 4). Admittedly a large share of the drop is caused by those above the age of 65, likely due to retirement, but younger groups of discouraged workers also saw their numbers declining. They are benefitting from the recovery on the labour market, where in the last quarter the number of job openings rose to 227,000. That is 14,000 more than in the third quarter and is the highest number in almost nine years.

Figure 3: More paid jobs
Figure 3: More paid jobsSource: Statistics Netherlands (CBS)
Figure 4: More people getting encouraged
Figure 4: More people getting encouragedSource: Statistics Netherlands (CBS)

In January the seasonally corrected unemployment rate dropped to 4.2%, against 4.4% in December (see figure 3). For now we expect unemployment to average out to 4.2% in 2018 as a whole, but given the good start of the year we might revise this number downwards in upcoming forecasts.


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