The Netherlands Faces An Increasing Risk of A Housing Market Bubble

There has been a rising confidence in the property market in the Netherlands to the level where the people are willing to pay more for housing units. This situation is being propagated by a string of economic factors that have instilled confidence in buyers. The most prevalent factor is that there is a huge expectation by market buyers that the property rates will increase in the foreseeable future. The Netherlands has seen a formidable growth in recent years. Sectors like the foreign exchange market (also known as forex rendement in Netherlands) have been steady as well.

Buyers Are Using Own Funds to Purchase Property

Market observers have confirmed that most buyers are purchasing property with their own money and not bank loans. The buyers are offering money to sellers leading to property rates to soar. This has no good implications according to analysts. It is expected that if the situation prevails, the market will find itself in an inevitable bubble. Since people are not using banks to facilitate their spending on houses, four key things have a high likelihood of occurring. They are:

• (a) The supply of property will not be able to meet the demand
• (b) The market rates for the property will rise
• (c) The market will hit a peak demand and stall
• (d) The bubble will finally burst and lead to a crumbling of property prices

If any of these scenarios play out, the Netherlands will be stuck in a turmoil that will take a couple of years to reconcile. The property market could also have ramifications for other areas of the economy.

The Situation Is Rampant In Major Cities

The increasing property prices are not good news for the economy. Fortunately, only a few cities have been reporting this rise in property rates. Cities like Utrecht and Amsterdam have been badly hit by the situation and the effects of the looming bubble will be felt most in these cities. In the cities, lending rates have been lowering for a while now to attract more people to borrow. There has been no urge to borrow, however, even though the rates are much lower than the other areas in the country.

The major concern for market analysts is that most of the buyers are not investing in the property for their own needs. Instead, they are buying and solely leasing it out to other parties. This has been the major cause for spiraling prices in the market. The consequences of this have already started exhibiting themselves. A growing inequality has been reported in many areas. People who can afford higher rates have essentially pushed those who cannot to the extremities.

The Possible Solution for the Looming Crisis

Among the solutions that have been proposed by experts is for the government to step in and increase the supply of housing units. This will hopefully help bring down the escalating prices of property. The leveling of the market will in turn balance out the economy and reduce the growing inequality. Without these measures, the looming bubble will be unavoidable and the consequences to the economy will be dire.