Labour market emancipation results in booming Dutch owner-occupied housing market

Abstract

During the 1970s and 1980s, the proportion of dual-income households in the Netherlands increased rapidly. Dutch society lagged a little behind other Western societies in terms of the emancipation of women in the labour market, but women began to enter the labour market more often and continue working while raising children. Households with a stable dual-income became more common. Mortgage lenders reacted to this situation by introducing new mortgage products onto the market. From the year 1993 onwards, the ‘dual-income’ mortgage made it possible to take out a mortgage against the income of both partners. The owner-occupied market became accessible for many more households and the potential demand for housing in this sector of the market rose sharply. However, since there was no corresponding expansion in the supply of new housing, house prices also rose strongly during the 1990s. The rising trend in house prices created a huge increase in equity for households that already owned their home. The combination of this increase in equity, new forms of mortgages and relatively low interest rates led to a growth in the demand for owner-occupied dwellings in the middle and upper end of the housing market in the late 1990s and the first two years of this century. The owner-occupied market boomed. The average house price rose by 10% to 15% per year, the number of transactions climbed up from 70,000 in 1990 to 130,000 in 2002. The number of newly built dwellings in the owner-occupied sector grew to around 70,000 units per year in the late 1990s, with a shift to more expensive houses. However, the effect of the dual-income mortgage introduction on the housing demand fades away into the early years of this century. Additionally, the sharp rise in the house prices made owner-occupied dwellings less affordable and the sector less accessible for first-time buyers. The continuing growth in the potential demand for owner-occupied housing is now slowing and in some sectors and regions there has even been a drop in demand. The ‘credit crunch’ of 2008 has only served to reinforce this slow-down, which was already underway.