Why are Dutch houses are becoming unaffordable

A few months ago, my wife and I sold our apartment in Rotterdam. It was a nice place and we’d loved living there, but in truth there was nothing remarkable about it: four rooms plus a balcony the size of a bathtub, all squeezed onto the upper floors of a building which listed like a sinking ship. Given that, we were thrilled to sell it within a couple of weeks for much more than we’d expected. The champagne had barely been poured, however, when we received a sheepish phone call from our estate agent, explaining that the buyer had been unable to secure a mortgage, and had withdrawn his offer. The apartment wasn’t sold after all. We were despondent, but it didn’t matter too much: three days later we managed to sell it again; to a buyer who didn’t just match the previous bid but exceeded it by a significant amount. The price, it seemed, had risen by about 25,000 euros in a week. The apartment – small and wonky and in a slightly tough neighbourhood – was apparently worth roughly double what it had been eight years ago.

In the past, such stories were rare in the Netherlands. Despite their anarchic, fun-loving reputation, the Dutch generally are quite conservative when it comes to financial matters. Debt is often frowned on, executive salaries are unspectacular, and houses are usually small. Even the wealthy often live surprisingly humble lives; dressing casually, cycling to work and eating homemade sandwiches for lunch. For years, these attitudes seemed to be reflected in property prices. In the Randstad (the urban heart of the Netherlands, where most of the population lives) it was until recently still possible to buy a fairly nice apartment for perhaps 100,000 euros, and a habitable one for perhaps half that; a fraction of what it would cost in some other countries. As a result, even in big cities like Rotterdam and the Hague, it wasn’t unusual to meet single people in their twenties, living on fairly low incomes, who owned their own homes – something which was almost unthinkable in London or New York.

Now, though, that’s all in the past. After dipping after the financial crisis, Dutch property prices are rebounding spectacularly. According to the national statistics agency, housing prices in the Netherlands rose by 9.3% in the first quarter of 2018 alone. Around a third of houses are selling for more than their asking price, and it’s increasingly common to hear of buyers paying tens of thousands above the asking price. According to estate agents, the average sale price reached a record high of €288,000 in early 2018, and is forecast to hit €300,000 soon. The Netherlands isn’t the only place where prices are rising, but the rate of increase here is roughly double that of the UK, Germany, or France; and one study found that houses on the Dutch side of the Dutch-German border were about €23,000 pricier those a few miles away in Germany, despite being smaller. In the more rural east and north of the Netherlands prices are still relatively low but in Amsterdam, growth has been dazzling: the price of the average home rose by nineteen percent in the last year alone, to €462,000. Some buyers inevitably pay even more: Justin Bieber reportedly bought an apartment in Amsterdam’s city centre for a cool $27 million. “I’ve been in the business for twenty-five years, but I’ve never seen it like this”, one estate agent in Gouda told me. “People are buying apartments faster than I can sell them”.

The reasons for the Dutch property boom are complex, but it’s essentially down to a familiar cocktail of factors: an expanding economy, low interest rates and a shortage of new homes. Like many countries, the Netherlands suffered an economic downturn after 2008, but has since recovered strongly. As consumer confidence improves, people are keen to get moving again. On the other side of the equation, there are also problems with the housing supply. The Netherlands’ population is growing slightly, and Brexit has pushed some big organisations to relocate from London to Amsterdam. Interior Minister Kajsa Ollongren has said 700,000 new homes will be needed by 2025; but in the most crowded country in Europe, there aren’t that many places to put them. “A lot of the houses in Rotterdam were built in a hurry after the war, and so aren’t very good quality”, another estate agent told me. “But that doesn’t seem to matter – there aren’t many new homes, so people are desperate to buy whatever’s available”.

Politically, it all represents a headache for the government. Plans to build more affordable housing have stalled, and there are long waiting lists for social housing. At one local election debate which I attended a few months ago, candidates from across the political spectrum tied themselves in knots arguing for rapid housebuilding while also pledging to keep the local area unchanged . “We need to build hundreds more homes which young people can afford”, one right-wing candidate said, moments before complaining about the loss of local green spaces, the overcrowding of the nearby town centre and the number of east Europeans working for low wages in the building trade.

Economically, meanwhile, the big concern is that the whole economy could take a nosedive if the house price bubble bursts. “Extreme house price growth is unsustainable”, Rabobank has warned, and is leading to “an increased risk of stronger market downturns once a turning point occurs”. Socially, too, the explosion of property values has caused strains. The Netherlands is known as an egalitarian place, where the proletariat and the elite live happily together in a beehive of tiny apartments and offices. However, as property prices soar, people on lower incomes risk being displaced; forced to the periphery of urban centres, or out of town altogether. This isn’t always a problem – most places in the Netherlands are within an hour or so of each other by train, and many Dutch employers are happy to pay employees’ commuting costs. Some cities have also made efforts to make commuting easier. There are more trains between Amsterdam and Utrecht, for example, and a new north-south metro line is helping open the north side of Amsterdam to development. However, preposterous prices are no longer confined to the capital, and prices in cities like the Hague are now rising even faster than they are in Amsterdam. “My job’s in Amsterdam but I have to move to Westzaan!” one acquaintance told me in despair, referring to an unexciting town north of the capital. “Imagine that! Westzaan! It’s like living in another country!” To Brits or Americans who suffer through long commutes, living twenty miles from work might sound like a good deal. But for some people in the Randstad, the ‘Dutch dream’ – a nice neat apartment a short bike ride from work, in a neighbourhood with bars and shops – looks increasingly hard to attain.

A final challenge is gentrification, as relatively deprived urban neighborhoods are abruptly reshaped by affluent arrivals. Walking around my old neighbourhood in Rotterdam this week, I was shocked by how quickly it was changing. When I first moved there, years ago, North Rotterdam still felt fairly gritty. It was relatively rare to hear people speak English, and tourists were in short supply. If I wanted finer foods – Italian ham, say, or nice Belgian beer – I’d buy them in other cities. Now, though, things are rather different. Rotterdam’s gleaming new train station offers a warm welcome for foreign visitors, who flock to the fancy food stalls in the new market hall. ‘Brown bars’ (bruine kroegen) where sozzled locals once grumbled and gambled over little glasses of Heineken are now fashionable bistros, serving expensive brunches of salmon and sourdough. After years when Rotterdam felt like a poorer, scruffier sister to Amsterdam and the Hague, it’s suddenly hip: a Berlin or Brooklyn on the Maas. From the perspective of people like me, it’s all rather wonderful. But it’s also not hard to see how people like my old next-door neighbour could be disgruntled: the nice Dutch family over the road has been replaced by a group of American students, the local bar has been converted to a fancy coffee shop, and the local grocers’ is now a vintage record store. Between the 1960s and 2000s, the arrival of thousands of (largely Moroccan) immigrants  transformed many Dutch neighourhoods, and made some older residents feel that the Netherlands was becoming a foreign land. Now, rapid gentrification may be having a similar effect.

Before leaving Rotterdam, I went for a pastel de nata and cold-press coffee, and then stopped briefly to look in the windows of a local estate agent. Browsing the properties, I was mildly disappointed to realise that prices had risen sharply yet again, and my wife and I probably could’ve made even more profit if we’d waited a few months. The couple standing next to me at the window didn’t seem to mind, though. A  young woman with flowers tattooed on her arms pointed to a photo of an ugly modern apartment which was on sale for well over a quarter of a million euros. “We should buy something soon”, she told her boyfriend, “before it gets expensive”.