Expectations were that the overheated housing market would calm down as a result of the corona crisis, but this prediction has not yet been met. Matthijs Korevaar, Assistant Professor of Finance at Erasmus School of Economics, explains why in Het Financieele Dagblad.
highest house prices in 20 years
The latest quarterly figures from the Dutch Association of Real Estate Agents (NVM) showed the hardest rise in house prices in twenty years. House buyers paid an average of €354,000 in the third quarter, almost 12% more than last summer. Nobody knows exactly when prices will start to fall. Korevaar emphasises that the housing market is not a stock exchange, where buyers and sellers have comparable information. This slows down the game of supply and demand. According to Korevaar, sellers do not immediately adjust the asking price if it turns out that there are many bidders. This only happens when new homes come onto the market.
The housing market at times of a pandemic
The current crisis caused by the pandemic also differs from a normal economic crisis, says Korevaar. He investigated what outbreaks of plague and cholera did to the Amsterdam and Paris housing markets in the seventeenth and nineteenth centuries. The rising death toll caused demand to drop, supply to increase and prices to fall. But a few months later, the housing shortage in the growing cities started to recover. The current housing shortage of 331,000 units also contributes to this, concludes Matthijs Korevaar.