Dutch housing and mortgage market Q3 2024

Main developments

The Dutch economy continued its expansion in the third quarter with a robust growth rate of 0.8%, supported by steady household spending and public investment. Inflation rose to 3.6%, notably higher than the eurozone average, due in part to recent increases in Dutch taxes and excise duties. The ECB responded with additional interest rate cuts in September and October, aiming to support lending conditions and consumer confidence.

The housing market remained highly competitive, with transaction volumes increasing by 13% quarter-on-quarter. The supply of homes continued to tighten, with only 2.1 homes available per buyer. House prices continued to rise, reaching €463,472 for an average home—an increase of 11% year-on-year, although the rate of growth slowed towards the end of the quarter.

Mortgage volumes grew significantly too, reaching €36.7 billion, driven by higher house prices and increased average mortgage amounts. The number of mortgage applications stabilised, with short fixed-rate terms (10 year) remaining popular with a 65% market share. Mortgage affordability has become more challenging, with households now dedicating a larger share of their income to housing costs, influenced by increased mortgage rates and house prices.

Looking forward, adjustments to the NHG threshold and premium are expected to increase market accessibility for first time buyers, while the ECB policy decisions are likely to shape mortgage rates in the near term.

Economic indicators

The Dutch economy recorded robust growth of 0.8% in Q3, building on the previous quarter's expansion. This continued recovery is mainly driven by steady household spending and increased public investment. In response to inflationary pressures, the ECB implemented further interest rate cuts in September and October, supporting more favourable lending conditions and stable consumer sentiment. Inflation in the Netherlands rose to an average of 3.6% in the third quarter, higher than the broader eurozone rate, partly due to recent increases in Dutch taxes and excise duties.

Economics

After nearly two years of stagnant growth, the Dutch economy continued its growth trajectory in Q3 2024 with a GDP growth rate of 0.8% QoQ. This robust pace exceeds analysts' expectations of modest growth of between 0.2% and 0.5% and follows a strong 1.1% increase in the previous quarter. The recovery is largely driven by higher household spending and increased public investment, which have potentially offset some of the challenges posed by global uncertainties. These results highlight the resilience of the Dutch economy and outperforming the eurozone, where growth was recorded at 0.3% during the same period.

Despite these positive developments, the economic outlook remains cautious. External factors such as geopolitical tensions, fragmented global trade, and potential financial market corrections continue to pose risks to inflation, purchasing power, and overall economic stability. According to the Netherlands Bureau for Economic Policy (CPB) and the Dutch Central Bank (DNB), these risks underscore the importance of continued vigilance in fiscal and monetary policy.

Looking ahead, DNB expects the Dutch economy to moderately grow in 2025 with 1.3%, driven by steady domestic spending and public investment. While tight monetary policy and global trade challenges may limit growth potential, easing inflationary pressures and a stabilising labour market are expected to support a balanced economic outlook. Nevertheless, medium-term resilience remains vulnerable to global uncertainties.

The eurozone's 0.3% GDP growth in Q3 2024 demonstrated continued strength, marking the third consecutive quarter of expansion. This steady performance is supported by the ECB’s recent monetary easing measures. Following its initial rate cut in June, the ECB reduced policy rates by an additional 25 basis points in both September and October to strengthen resilience in business and consumer sectors. Given the stronger-than-expected economic growth figures, the likelihood of a rate cut in excess of 50 bps in December, as previously suggested by the ECB, has diminished.

Inflation

After a stable first half of 2024 with persistent inflation, the rate rose to an average of 3.6% in Q3, up from 2.9% in Q2. In contrast, eurozone inflation was lower, at 1.7% in September and 2.0% in October, highlighting higher inflationary pressures in the Netherlands compared to the eurozone.

Food prices remain a substantial driver of inflation, with annual increases hovering around 6%, largely due to global supply chain disruptions and elevated agricultural costs. Inflation in services remains high as wage pressures mount, with companies adjusting pay to offset the rising cost of living. Additionally, recent hikes in taxes and excise duties contribute roughly one percentage point to the inflation rate. Meanwhile, climbing housing costs—driven by robust demand and high construction costs—contribute to inflationary pressure as well.

The International Monetary Fund (IMF) expects Dutch inflation to continue to moderate in the coming years. The IMF expects headline inflation to decrease in 2025, as supply chains stabilise and energy prices remain lower. By 2026, inflation is anticipated to move towards the ECB target of 2%, driven by easing wage pressures and a more balanced labour market.

Sentiment indicators

Overall consumer confidence remained steady in Q3 2024, with the average confidence level reaching 77, compared to 78 in Q2 2024. This reflects stable sentiment among Dutch households, though confidence continues to sit below the neutral level of 100 and remains well below pre-pandemic levels. On an annual basis, consumer confidence has improved by +16 points from the Q3 2023 average of 61, highlighting a considerable recovery in sentiment over the past year.

Confidence in the housing market continued to recover, supported by households' more positive outlook on their financial situation and slightly lower mortgage rates. The sentiment indicator averaged 91 in the third quarter, up 21% year-on-year. However, challenges such as limited housing supply and affordability constraints remain a concern. These factors could weigh on future confidence levels if not addressed.

Labour market

The Dutch labour market remained strong in Q3 2024, with unemployment remaining stable at 3.7%. This tight market is challenging for companies when hiring, but provides job security and supports economic stability. Although labour demand is showing the first signs of easing, with a slight decline in job vacancies and stable employment growth, companies are retaining staff by reducing working hours rather than making layoffs, especially in the private sector. Public sector hiring, particularly in health and education, continues to increase.

Nominal wages grew by 7.0% YoY in September, but adjusted for inflation, real wage growth was 3.4%. While wage increases have varied across sectors, overall wage growth has helped to restore some of the purchasing power lost during high inflation in 2022 and early 2023, supporting consumer spending.

Bankruptcies averaged 395 per month in Q3, up 3.7% QoQ and 35.3% YoY, as companies adjust to a higher interest rate and inflation environment. Despite the increase, bankruptcies remain low by historical standards, suggesting that most companies are adapting well.

Housing market

The Dutch housing market continued to experience strong demand especially for apartments, with a notable increase in transaction volumes despite limited supply. House prices continued to rise, although at a slower pace towards the end of the quarter.

Transaction volume and housing supply

The Dutch housing market saw a significant increase in transaction volume in Q3 2024, with 54,147 transactions—a 13% rise compared to the previous quarter and a 15% year-on-year. This continued upward trend pushed the 12-month rolling average up by 8% YoY, reaching 197,050 by the end of Q3. The market for apartments is particularly dynamic, with transactions up 18.9% year-on-year. Demand pressures are intensified by urbanisation and population growth, especially in urban areas where the supply of new units is constrained by construction delays and regulatory challenges. Additionally, apartments remain a popular choice for both first-time buyers due to their relative affordability, further driving up demand and competition within this segment. Notably, the increasing number of smaller households contributes to this increase in demand, as more individuals opt for single-person households, particularly among first-time buyers.

The housing market became even tighter, with only 2.1 homes available per buyer, down from 2.4 in the previous quarter. This trend underscores the increasing competitiveness of the housing market, particularly as supply remains limited. In Q3 2024, the number of houses for sale dropped to 25,655, a decrease of 9.2% QoQ, following a temporary increase in the previous quarter. While buy-to-let investors initially increased housing supply by selling off properties in response to regulatory changes, this influx appears to be slowing as the pool of rental properties for sale diminishes.

According to rental website Pararius, the supply of rental properties decreased by 37.6% year-on-year. This shift has added pressure on the rental sector, driving rents up by an average of 7.4% YoY, with average monthly rents now around €1,751. In response, the Dutch government announced plans on "Prince’s Day" to stabilise rental supply by reducing the transfer tax rate for private investors from 10.4% to 8% starting in 2026, aiming to make property rentals more attractive and retain more properties within the rental sector.

New construction and housing shortage

The number of new homes built in Q3 remained stable at 17,130. On a 12-month rolling basis, the total number of new homes reached 70,233, a pace that remains well below the Dutch government's target of 100,000 homes annually. This target was reinforced in the Prince’s Day announcements, where the government allocated €5 billion for housing over the next five years and a further €2.5 billion for infrastructure improvements. To further alleviate the housing shortage, approximately 10,000 additional buildings are being transformed into residential units each year.

After three consecutive quarters of growth, preliminary data for Q3 suggests a possible decline in building permits compared to Q2. Regardless, the quarterly total is expected to fall well short of the 25,000 permits needed to meet the government's annual housing target. Regulatory and environmental constraints, including strict building codes, zoning laws and environmental policies, as well as high construction costs, labour shortages and administrative delays, have slowed housing availability.

Mortgage market

The Dutch mortgage market continued to grow in volume, supported by an increase in housing transactions, higher house prices, and expanded borrowing capacity. Although mortgage applications stabilised this quarter, overall demand remains strong, with shorter fixed-rate terms still favoured by borrowers. Upcoming adjustments to the NHG threshold and premium are expected to further support first-time buyer accessibility in the market, making home ownership more attainable for a wider range of buyers.

Mortgage volume and applications

The Dutch mortgage market experienced significant growth in Q3 2024, with total volumes reaching €36.7 billion—a 14.7% increase from the previous quarter and a 36.5% rise year-on-year. This expansion was driven by both an increase in the number of transactions and the average mortgage amount driven by the strong house price increases. The average mortgage amount for home purchases rose 7.2% YoY to €361,785, while the number of new mortgages in Q3 reached 99,550, a 23.2% increase year-on-year.

The number of mortgage applications, an indicator of future mortgage volume, remained strong at 116,052, up 22.5% year-on-year. The buyers' market saw almost 31,758 mortgage applications for house purchase in October—a historic high, surpassing the previous record of 31,510 set in March 2020. Shorter fixed-rate mortgages, especially 10-year fixed remain popular, with almost 60% of total applications, while NHG-backed mortgages continue to grow, representing 1 in 3 of new applications.

Mortgage affordability

Despite stable confidence in the housing market, mortgage affordability has declined over the past two years. Households are now spending a larger share of their net income on housing costs—up from 30% in 2022 to 41% in Q3 2024 for an annuity mortgage. This drop in affordability is mainly due to sharply risen mortgage rates.

According to the latest Woonlastenmonitor by Nationale Hypotheek Garantie (NHG) in the past 12 months 18% of home owners experienced difficulties paying their mortgage. This is a slight reduction compared to last quarter (20%). Of this group 3% of households expects to face severe difficulties to pay. However this translates only into 6% of homeowner having ever faced a mortgage in arrears since buying their first house. Overall the trend in terms of mortgage arrears reported by NHG remains steady and low.    

NHG developments

One notable development affecting the mortgage landscape is the upcoming adjustment of the NHG (National Mortgage Guarantee) threshold. The NHG is a scheme that provides homeowners with financial protection in case of unforeseen circumstances, such as forced property sales. As of 2025, the NHG limit will rise to €450,000[1] from the current €435,000. In addition, the NHG premium will be reduced from 0.6% to 0.4% of the mortgage amount in 2025.

It is notable that the NHG limit has nearly doubled from €290,000 in 2019 to €450,000 in 2025. However, figure 7 shows that the increase in the average house price in 2024 once again outpaces the rise in the NHG limit. In September, the average transaction price for a home was nearly €467,000—significantly higher than the new NHG limit of €450,000, set for January 1, 2025.

The NHG limit is based on a 27-month rolling average of house prices, adjusted by a correction factor of 4%. This approach smooths out short-term price fluctuations and ensures that the NHG limit is consistent with longer-term market trends. While this method increases predictability, it also introduces a lag for rapid price changes, such as significant market rises or falls. The corrective factor aims to reflect historical price growth, but is reviewed periodically to maintain its effectiveness.

[1] €477,000 including a construction deposit for energy-saving measures.

Mortgage interest rates and spreads

10 year EUR swap rates dropped by an average of 35 basis points between June and October. Mortgage interest rates at the same time only showed a limited adjustment, partly due to the typical slowdown in activity over the summer. This led to an increase in mortgage spreads by approximately +34 basis points for 10-year fixed, +27 basis points for 20-year fixed, and +29 basis points for 30-year fixed over the past few months.

Mortgage performance

The Dutch mortgage market continues to perform very well, with stable, low levels of losses and arrears. The Dutch National Credit Register (BKR) also noted a downward trend in their latest report on payment arrears on mortgages.

To provide a projection of losses for the upcoming year in the Dutch mortgage market, public mortgage loan data (European Data Warehouse) is used as input for stress tests in Moody’s Portfolio Analyser. The stress tests are based on different scenarios as described below.

In all scenarios, losses are expected to remain exceptionally low:

1. The baseline scenario (S0) assumes that Russia’s invasion of Ukraine continues but does not expand beyond Ukraine, and Israel’s conflict with Hamas does not escalate into an all-out regional conflict. Energy markets remain stable, with global oil prices near current levels and natural gas prices only slightly higher than pre-pandemic levels, supported by strong liquefied natural gas imports and continued Russian gas flows. Supply chain disruptions from the Red Sea and Panama Canal increase inflationary pressures slightly but do not cause shortages. The ECB continues gradual rate cuts, while fiscal policy shifts toward expansion despite higher borrowing costs. Economic growth remains moderate, with government consumption and disposable income gains driving recovery, though growth stays below potential until 2025. Unemployment rises marginally, inflation converges to the ECB’s 2% target by mid-2025, and financial markets remain calm. Structural challenges, including a declining workforce and low productivity, weigh on long-term growth.
2. The stronger near-term growth scenario (S1) assumes that the Russia-Ukraine war ends faster than anticipated as pandemic fears subside. These developments boost both aggregate demand and supply. On the demand side, recession concerns are alleviated, leading to improved consumer and business sentiment. On the supply side, improved energy security, the elimination of supply bottlenecks, and productivity gains driven by NextGenerationEU funding result in rapid economic growth. The strong economic performance reduces domestic political tensions, enabling effective reforms and investment.
3. The protracted slump scenario (S4) assumes the global economy fails to recover, with sentiment in the eurozone plummeting. The risk of the Ukraine conflict escalating into a NATO confrontation becomes acute, while tensions between the U.S. and China lead to significant barriers to shipping. Political risks in the eurozone increase sharply as populist parties exploit voter discontent. These geopolitical and economic risks trigger a severe sell-off in financial markets, plunging the economy into a deep recession.

For Q3 2024 we conclude that:

• The performance of Dutch residential mortgages remains strong. This is most likely due to the healthy financial position of borrowers as a result of rising wages and the continued tightness of the labour market.

• In general, the impact of economic developments over the past year has not led to significant changes in either the expected loss or the probability of default of the mortgage portfolio.

Please note that the 1Y and Lifetime horizons represent the expected impact of each scenario on the mortgage portfolio over the next year and until the portfolio matures, respectively. In addition, the scenario vintages are the scenarios as assumed by Moody's at the indicated time and are therefore based on the relevant economic dynamics at that time.

Annex I: Key indicators

Definitions