2021 Outlook For Belgian And Dutch Housing Markets

…but uncertainties for second half of the year are greater than ever

Our base case, however, could easily become outdated. Uncertainties on the housing market are greater than ever. First, there is uncertainty about the economic impact of the COVID-19 crisis. Second, the role of psychological factors on the housing market increase uncertainty levels around short-term house price developments. Future confidence in the housing market will be a result of a mixed bag of influences, such as unemployment development, economic performance and interest rate developments. A turn in confidence could happen rapidly. Together with the high cyclicity of the housing market and many self-enforcing mechanisms, this amplifies the possible impact of the crisis on the housing market. The most positive scenario is a situation in which the economy recovers fast, the COVID-19 virus is successfully controlled and interest rates remain low. This will support consumer confidence and limit income losses of households, thereby preventing a significant drop in housing demand. In this scenario, wealth effects of second-time buyers could lead to even further prices increases. If, however, economic recovery takes longer, uncertainties related to the pandemic remain high and push risk premiums in mortgage rates up, and this could result in plunging housing demand and lower house prices.

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