Competition up in Amsterdam as Domestic and International Buyers Flood Market
Expect some price cooling but continued demand this year amid uncertainty from the Ukraine conflict

Like many around the globe, Amsterdam’s real estate market has seen demand intensify and prices rise dramatically over the past two years. In December of last year, housing prices across the Netherlands had shot up by 20.4% year over year, the sharpest increase seen since 1977.

The Dutch city’s luxury sector in particular is experiencing significant price appreciation. As of May, Amsterdam was home to more than 18,000 properties valued at over €1 million (US$1.05 million), an increase of 48% year over year, according to property valuation site Calcasa.

Tight inventory is a major factor in the rise in prices, which is contributing to limited options for Amsterdam’s renters, as well. On the buying side, a 2021 expansion of lending standards increased the borrowing capacity of dual earners by 2% to 3%, which has spurred people to seek out larger, more expensive properties.

“There’s a huge problem with the shortage of residential houses in the Netherlands, especially in big cities,” said Jim Reerink of Netherlands Sotheby’s International Realty. “Buyers are looking at the maximum they can borrow from the bank, and spending more in higher segments of the market.”

As in many other cities, lifestyle factors are also fueling demand for more spacious, high-end properties in Amsterdam.

“What you see after Covid is more people looking for apartments and houses with outdoor space,” Mr. Reerink said. “They’re spending more time working at home with their children around, which activates a kind of alarm bell.”

The return of foreign buyers is further stimulating price growth, as investors seek out luxury properties with a high level of service.

“We see buyers from Amsterdam itself, the rest of the Netherlands who would either like to move permanently to Amsterdam or buy an expensive pied-a-terres, investors who buy to let, and of course international buyers, including buyers from the U.K., United States and Asia,” said Leslie de Ruiter, managing partner at Residence 365, an affiliate of Christie’s International Real Estate in the Netherlands.

Across the board, he said, these buyers are interested in move-in ready properties with outdoor space.

“It is easier for us to sell the best of the best against a high price than a property which still has to be renovated against a lower price,” Mr. de Ruiter said. “Outside space is also important, and buyers prefer a house or apartment with a small garden or a terrace instead of one without any outside space.”

Among wealthy investors, neighborhoods like the cultural hub of Oud-Zuid, City Centre, and Zuidas are particularly popular, and the rise in home values in these areas are pushing less wealthy buyers to the suburbs and city outskirts.

The convenience offered by Amsterdam’s location, as well as its thriving economy, should continue to draw in new expats this year.

“Amsterdam is one of the most sought-after destinations by expats and international companies,” said Peter Beerents, senior managing partner of Baerz & Co., a luxury home agency group in Amsterdam. “It’s centrally located in Europe, many languages are well spoken here, it has an attractive tax climate for internationals, there’s a highly skilled labor market, and Schipol airport connects to metropolises around the world.”

Outlook for Amsterdam

Low unemployment and high job vacancies will continue to draw more people to Amsterdam this year, according to Knight Frank’s 2022 European Outlook report. Real estate prices in Amsterdam are anticipated to continue to rise, albeit more slowly than they have in recent years.

Interest rates have increased, along with other government regulations that should put some downward pressure on buying, including an increase in transfer taxes. Furthermore, new restrictions have been implemented to benefit first-time buyers over private investors in a number of Dutch cities, including Amsterdam, according to ING.

Economic uncertainty spurred by the war in Ukraine may also prove to have a cooling effect on both demand and prices.

“Things will stabilize due to overheated markets,” Mr. Reerink said. “The war in Ukraine has gas and oil prices increasing, which works through the whole economy and makes people feel uncertain about the future.”

The potential for economic repercussions from the conflict is leading to a slight slowdown in prices and competition.

“We’re seeing the rise of prices slowly declining, and far less overbidding at the moment,” Mr. Beerents said. “The market seems to be cooling off a bit, although demand is still strong.”

And with an ongoing shortage of housing supply and plenty of buyers on the lookout, Amsterdam’s real estate market should remain quite active for the foreseeable future.

“Our expectation is prices will stay rising slightly but not as fast as before,” Mr. de Ruiter said. “They will not go down—on the contrary—but rising prices with double digits cannot continue.”

Source: Mansion Global