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Don’t automatically expect house prices to fall, warns IMF rep

People who want to buy a house in the Netherlands may automatically start expecting house prices to fall following the recent drop, the Dutch representative at the International Monetary Fund has told news agency ANP in an interview. ‘Economists call this adaptive expectations,’ Paul Hilbers said. ‘It means that people start to expect house prices to fall simply because they have already dropped considerably in price.’ However, he said, it would be dangerous to base buying a house on this premise because it could lead to house prices going down purely because people expect them to do so.
Figures from estate agents association NVM last week suggest house prices fell 8.2% in the first quarter of this year. Hilbers said he is not ‘overly concerned’ that house prices have gone down so quickly and says not many home owners will end up in the situation that they owe more on their mortgage than their home is worth. House prices did rise considerably up to the second half of last year, he points out. And once interest rates stop rising, the market will settle down again he said, adding that the shortage of available homes in the Netherlands will also help brake the fall in house prices at a certain point. The IMF has repeatedly called on the Dutch government to limit the amount people can borrow to buy a house, which is currently 100% of the value of the property. However, given the current situation, it would be better to do this once the market starts to recover, Hilbers said.