House prices in many major economies are rising.This FT series Explore whether these increases are sustainable.

Joan Kelderman, a Dutch call center worker, learned from personal experience the disadvantages of the soaring house prices in Europe: her landlord is trying to demolish her low-cost rental house to build new housing and retail complexes.

Local authorities in Zaandam, a small town a few miles north of Amsterdam, said the plan will build more than 530 new houses, 30% of which will be social housing; about half will be sold or rented at market prices.

But the 57-year-old former nurse called it “gentrification” after she and other residents received a moving allowance of 6,500 euros and were told to leave. “They said we had to find another place to live, but there was nothing,” she said. “Even if we do find something, it will be smaller, more expensive, and farther away.”

The Dutch real estate market has become an urgent political issue. In the year to June, the price of existing houses in the Netherlands increased by 14.6%, the highest level in 20 years and one of the highest prices in the European Union.

Economists at ABN Amro estimate that the number of houses in the Netherlands is 330,000 fewer than needed, and an additional 1 million should be built in the next ten years to close the gap. Low-income people usually have to wait more than 15 years to obtain social housing, and the number of homeless people has doubled in the past decade.

Kelderman and dozens of her tenants recently marched against the local mayor’s office to counter the plan to demolish 122 social housing for low-income or disabled people. She said they will challenge these proposals in court.

They are not alone; social unease about housing costs is increasing throughout Europe. Protesters in Spain took to the streets in March, calling for fairer housing costs. The Swedish government was overturned last month for its proposal to remove the rent ceiling. In September, Berlin residents will vote on whether to expropriate 240,000 properties from large commercial landlords.

According to Eurostat data, in the three months to March, EU house prices rose by 6.1% year-on-year, the fastest growth rate in 13 years, and a 30% increase since 2010. Over the same period, rental costs have risen by more than 15%.

Like the rest of Europe, the Dutch real estate market fell sharply after the 2008 global banking crisis and the 2012 Eurozone debt crisis. But since the European Central Bank cut interest rates to negative values ​​seven years ago, residential real estate prices have been rebounding strongly, thus driving down mortgage costs. Since the beginning of the coronavirus pandemic, further stimulus measures have fueled prosperity.

FT Series: Global House Prices-Raising the Roof

House prices in many major economies are rising-but is it sustainable?

part 1: How the pandemic happened Triggered the most extensive Global housing prices have prospered for more than two decades.

part 2: Buyers flock U.S. smaller cities, Reiterating policy makers’ concerns about affordability and risk.

Part 3: The Netherlands is struggling to cope with the social consequences of rapidly rising housing prices.

coming soon:

Part 4: Why do Berlin renters want to expropriate their houses from publicly listed landlords in Germany.

Part 5: Should house prices be included in inflation data, and how does the central bank respond to the economic impact?

Although housing costs are one of the biggest concerns expressed by the public during the ECB’s recent strategic review, its president Christine Lagarde (Christine Lagarde) Tell the financial times Last month, she believed that there was no risk of a bubble “on average across the euro area”. However, the European Central Bank has decided that the cost of owner-occupied housing should be included in its main inflation indicator used to calibrate interest rates, although this is expected to take several years to take effect.

The Bank of the Netherlands stated that high levels of household debt are “one of the main systemic risks in the Netherlands”; it aims to “ensure that the financial sector has sufficient strength to absorb the consequences of a depressed real estate market”. It is introducing a rule requiring banks to increase the risk of mortgage loans by 5 billion euros of capital from January.

Oxford Economics last month The Netherlands is listed as the riskiest real estate market among all advanced economies because house prices are 14.3% higher than its long-term trend, and house prices and rent ratios are 15.3% higher than its long-term trend.

“The biggest problem is young people, but young people now mean 30-year-olds who still can’t rent or buy things,” said Gert Jan Bakker, a consultant at WOON’s tenant support agency in Amsterdam. “The family is leaving the city. The people who teach our children, the police and the tram drivers-they simply can’t afford to live here.”

He blamed many problems on government policies. Buck said the Dutch rent protection system has been greatly weakened. It has become easier for landlords to stop renewing their tenant contracts, resulting in “many new urban nomads” who must move every two years.

Gert Young Buck
Gert Jan Bakker, consultant of the Tenant Support Agency, wants to end tax policies that are detrimental to social housing providers © Bram Belloni/FT

Tax changes have also dealt a particularly severe blow to social housing associations, causing them to sell many houses to commercial developers.

Buck said the government should stop allowing homeowners to deduct the cost of mortgage interest from their tax obligations-although he himself has benefited from this policy, and he admits that it is “politically difficult.”

The abolition of tax relief is one of the conditions that Brussels seeks from the Netherlands in exchange for its share in the 800 billion euro EU recovery fund.

Lex Hoogduin, a professor at the University of Groningen and a former board member of the Dutch central bank, said that housing costs “is a political issue and have been there for a long time.” “With all the permits required to build new homes in a highly regulated market, the inelastic housing supply exacerbates this problem.”

Amsterdam has taken a number of measures to solve this problem, including prohibiting people from buying second homes to rent on Airbnb and other short-term rental platforms.

People waiting for the ferry from NDSM to Amsterdam city centre
People wait for the ferry from NDSM to the city centre of Amsterdam. NDSM is a former shipyard. The industrial warehouses here have been transformed into modern apartments © Bram Belloni/FT

But Marjon, a 44-year-old historian, said that the high cost of housing in Amsterdam meant she had to sell her apartment after having children five years ago and move further north to afford more space.

Now, she takes a ferry from the former shipyard called NDSM to work in the city center, which is booming as scattered cranes transform industrial warehouses into stylish apartments, cafes, galleries and offices.

Marjon said that soaring housing prices are “not conducive to social cohesion.” “The teachers in our children’s school can’t afford to live… Not conducive to the atmosphere of the city. Soon, no one will live in this city except for very wealthy people and foreigners.”

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