Housing market Covid-19 update for 2021

The ongoing pandemic has touched every aspect of our daily lives. Almost one year has passed since Mister Mortgage discussed the impact of Covid-19 on Dutch mortgages. Now, Sezer Yilmaz looks back and discusses what happened and what we can expect in 2021.

Macro-level impact

The lockdown in 2020 triggered a severe recession within EU countries. The EU economy shrunk by 7,8 percent in 2020; the EU economy's forecasted growth is 4,2 percent  in 2021 and 3 percent in 2022. The European Central Bank continues to offer banks cheap loans to help the economy recover quicker.

Micro-level impact

The ongoing pandemic also affected the Dutch economy. Despite the second dip, it is expected the economy will grow by 2,6 percent in 2021. The Dutch government counters external weaknesses by providing a stimulus to stabilise the economy.

Impact on the Dutch mortgage market

The Dutch housing market performed strongly despite the COVID-19 crisis. The interest rates remained more or less unchanged because of ECB monetary policies in response to the situation. At the beginning of the pandemic, the expectation was that the number of home buying transactions would decrease in 2020. The fear of high unemployment and uncertainty of the future would reduce housing prices or freeze them for some time. Yet, the outcome was different. The market slowed down for two to three weeks before it moved forward again, as if there was no worldwide pandemic.

The number of transactions in Amsterdam was 17,8 percent higher in the third quarter of 2020 than in the third quarter of 2019. The number of transactions in the Netherlands was 14,4 percent higher in Q3 2020 than Q3 2019.

Low mortgage rates resulted in an increased demand to purchase a property. The existing housing shortage pushed prices up in the Netherlands; the housing prices increased by 8,1 percent in the third quarter of 2020 compared to the third quarter of 2019. During the last quarter, the housing prices surged again by 1,5 percent. The expected increase is +7,8 percent comparing 2020* to 2019.

*Confirmed data for December 2020 is not available yet.

Housing prices are expected to rise further in 2021 despite the COVID-19 pandemic. One of the biggest banks in the Netherlands (Rabobank) predicts prices to increase by 5,5 percent in 2021 and by 2,5 percent in 2022.

Impact on the work environment

Working-from-home requirements made homebuyers rethink their living spaces. The trend suggests that homebuyers aim to purchase bigger homes to work from home and provide homeschooling possibilities for kids. The ongoing pandemic has challenged the image of the traditional office. Many organisations have significantly reduced real estate costs.

Even though companies plan to reopen their offices, the working experience will not be the same. It is predicted that we will work from home multiple days per week because it takes time to adapt workspaces for new regulations. For this reason, a comfortable working environment has become the number one priority for a lot of people since the lockdown started.

Housing market insights 2021

Here are some predictions when it comes to the housing market for this year:

Housing market

• Housing shortage and development delays could push home seekers to slow down next year.
• Rising unemployment could cause a decline in sales. More people could postpone buying a home purchase because of their future uncertainty.
• The expected sales drop: From 220,000 homes sold in 2021 to 210,000 in 2022.
• The expected rise in housing prices: 5,5 percent in 2021 and 2.5% in 2020.

Mortgage & taxes

• The property transfer tax exemption for first-time homebuyers aged 18 to 35 who buy their first property (less than 400.000 euros) will increase the bids' competitiveness.
• Waved lending criteria for double income households and people who have student loans will lead to greater competition.
• The transfer tax bill could boost sales in the first quarter of 2021 because of the transfer tax changes. People aged 18 to 34 won't need to pay a transfer tax.

Other insights

• Decreasing mortgage interest rates and increasing demand for borrowing more and bidding higher will result in higher prices in 2021.
• Expected is that housing prices will follow a peak in the first quarter of 2021 because of the aforementioned exemption of property transfer tax for first-time homebuyers.
• Immigration to the Netherlands has sharply fallen, and more young people choose to stay at home. This could have an impact on transactions in 2021. However, the housing shortage remains.

With a wealth of experience in personal finance behind them, the team at Mister Mortgage saw the need for a more personal approach – one that thoughtfully considers its clients’ goals, families and futures. Please visit the Mister Mortgage website to find more information about mortgages in the Netherlands.