The Amsterdam housing market is not a bubble

'The Amsterdam housing market is not a bubble', conclude economists Matthijs Korevaar, Assistant Professor of Finance at Erasmus School of Economics, Marc Francke of the University of Amsterdam and Piet Eicholtz of Maastricht University. Their research shows that the enormous price rises in recent years can be well explained by the low interest rates, scarcity on the housing market and high rents.

According to Korevaar, Amsterdam has been the most expensive city in the Netherlands since the seventeenth century. In their research, therefore, historical house prices are compared with interest rates, rents and the supply of housing. The researchers came to the conclusion that there seems to be no major overvaluation. Amsterdam's ask prices do not deviate from real house prices and the increase in purchase prices is in line with rents, which have risen sharply in recent years.

Drivers behind the price increases

The low interest rate seems to be the main driving force behind the price rises. Residence seekers are encouraged to take out a mortgage and buy if they can afford it, given that mortgage interest rates are favourable and rents are high. In addition, professional investors are lured to the housing market, thinking they can get more return from a house than from shares or bonds. Finally, more jobs than houses have been created in Amsterdam in recent years, which has led to a scarcity on the housing market.

Decrease in house prices

The fact that the Amsterdam housing market is not a bubble that is about to burst is good news for homeowners. The value of their house is realistic. According to Korevaar, however, this does not mean that house prices cannot fall. Rents in the capital, for example, have already fallen as a result of the corona crisis. This could mean that house prices will also fall somewhat, especially if interest rates rise, says Matthijs Korevaar.

The Amsterdam housing market is not a bubble

Assistant professor

Matthijs Korevaar

More information

Click here to read the entire article from Het Parool or download the article from Het Financieele Dagblad above, both 3 September 2020 (in Dutch).

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