Dutch Residential Mortgage Market Update

In this commentary, we provide an overview of the Dutch housing market as well as how the recent past is shaping the residential mortgage-backed securities (RMBS) market.

Key findings include:
-- The Coronavirus Disease (COVID-19) crisis did not have a significant impact on the Dutch housing market as the government implemented several support schemes during the pandemic.
-- Over the past few years, the Dutch housing market has demonstrated substantial growth under limited supply and strong demand, while the low interest rate environment also supported the surge in housing prices.
-- The sharp housing price appreciation in recent years has outpaced the increase in disposable income, affecting the affordability of owner-occupied homes.
-- Various municipalities in the Netherlands have implanted purchase protection schemes to encourage more owner-occupied transactions, but it remains to be seen if such measures have any significant impact on taming the buy-to-let market.

“The demand for housing remained strong even during the pandemic, a phenomenon that was observed in other European jurisdictions as well. We expect the housing supply shortage to soften the impact of a rising interest rates environment and prevent a sharp reduction in housing demand. Affordability constraints due to rising interest rates are expected to appear progressively, as fixed interest-rate mortgages reach their interest revision dates.”, said Ketan Thaker, Head of European RMBS and Covered Bonds at DBRS Morningstar.