The Impact of Rising Wages on Dutch Housing Market

April 17th 2023 | News
The Impact of Rising Wages on Dutch Housing Market

Much has been said about the effect of increased mortgage interest rates and (the lack of) construction on house prices in the Netherlands. Years of accommodative monetary policy and a growing housing shortage have fueled a trend of double digit growth. The growth has cooled off following the interest rate hikes in 2022, and the market is facing a correction as shown by the CBS housing market index.

In a housing market with severe shortages, price growth is driven by demand. The lack of available housing have aligned affordability and borrowing capacity. Homebuyers buy the house they can afford. Borrowing capacity is determined by a couple of factors; interest rates, household income, regulations (e.g., maximum Loan-to-Income ratio) and, to a lesser extent, savings.

Over recent years, decreasing interest rates have pushed up the borrowing capacity and therefore prices. Looking forward, we believe household income can take over as a driver of growth .

Labour unions, facing a historically tight labour market, have pushed for record wage increases (often exceeding 10%) to protect the purchasing power of their members. After a year of peak inflation, inflation is expected to stabilise to approximately 5% for the next 2 years. Factoring in expected inflation only, stable real wages would result in a 36% increase in nominal wages.

The underneath graph takes the nominal wage increases forward. It adds the impact of newly introduced regulations on borrowing capacity, as well as a 1% range around current interest rates.

After two decades of near-zero interest rates, inflation considerations need to make their way back into investor’s portfolios. At Someday, we believe it is the loop from generic inflation to Real Estate appreciation, that can reinstate Real Estate as the inflation asset it once was in asset allocations.


Investment Management

Someday provides institutional investors efficient and diversified access to owner-occupied residential real estate across The Netherlands.

Request Investor Summary