Matthijs Korevaar expects house prices to rise further

In May, buyers had to pay an average of 445,430 euros for an existing home. Matthijs Korevaar, Associate Professor in the field of the housing market at Erasmus School of Economics, says: 'People can spend more money on a home. Together with a tight supply, this drives up prices. Mortgage interest rates have also now stabilised, after having risen sharply in the recent period.'

'Dutch government should focus on building new houses'

The increase is expected to continue in the coming months as wages continue to rise. According to Korevaar, in some places, housing prices are rising more than others. He notes: ‘The new cabinet should focus on building new houses in areas where house prices are the highest, because that is where new construction can have the greatest effect.’

Vision on the Dutch housing market

In January of this year, Matthijs Korevaar, together with Jasper van Dijk (research leader at the Institute for Public Economics), gave his view on the Dutch housing market in a Volkskrant article.

In this article, Korevaar and Van Dijk explain how politicians try to tackle the rising rent prices by regulating housing rents. Yet, regulation always yields winners and losers. For instance, a new law in the Netherlands which makes fixed rental contracts the norm will offer more security for tenants yet increase risks for landlords. In contrast, the Dutch government recently also regulated the buy-to-let market and lowered the property transfer tax, causing more people to buy houses to live in themselves. This led to more scarcity in the market for rental housing which increases the rental prices, the authors explain. 

‘Price cap will cause higher demand for rental homes’

To compensate tenants for these higher prices, the government wants to make housing rents more affordable by setting a price cap on some of the houses on the unregulated housing market. However, the authors note, a price cap will cause higher demand for rental homes while lowering the supply and thereby causing an even higher shortage. 

Vicious circle

Korevaar and Van Dijk fear a vicious circle where the negative side effects of one policy measure repeatedly must be solved with another measure. They conclude by explaining how the most effective policy to tackle the housing crisis is to build more houses. Meanwhile, the government should focus on other measures than the demand side such as encouraging people to live together.