(Bloomberg) -- The Dutch housing market is showing no signs of cooling.
In the second quarter, weighted median transaction prices in the Netherlands climbed 10.4 percent from a year earlier to a record 288,000 euros ($336,240), according to data published Thursday by real-estate association NVM. In the Amsterdam area, the median house price jumped 19.1 percent to 462,000 euros from a year ago.
House prices have surged, led by Amsterdam, the largest Dutch city, and other urban centers in the western part of the Netherlands, thanks to an expanding economy, low interest rates and a shortage of new homes. In Amsterdam, the property cocktail has an additional ingredient: an “open for business’’ campaign to attract firms seeking refuge from Brexit.
The Dutch housing market is “overheated,” NVM Chairman Ger Jaarsma said at a press briefing in Amsterdam when asked to describe his industry in one word. According to NVM, in a third of the deals, property was sold above the offer price and not since 2000 has the time a house is up for sale been this short.
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The hot property market is forcing national and local politicians to juggle meeting voter demands for affordable housing while also luring companies, both Brexit-related and otherwise. Plans have been announced in Amsterdam and in other parts of the country to add new homes, even as experts say these steps won’t help much to alleviate price gains anytime soon.
Dutch Central Bank President Klaas Knot, NVM and economists have also noted a spillover from Amsterdam to other cities, based on first-quarter housing numbers. This includes The Hague, home to parliament and international courts, and port city Rotterdam -- two towns where prices rose even faster than in the capital in the first three months of the year.
Houses available for sale, which slumped to the lowest level in 16 years in the first quarter, prompted fewer transactions and higher transaction prices. Shortages have been caused in part by a 50 percent cut in construction projects during the financial crisis, Rabobank economist Nic Vrieselaar told Bloomberg News earlier.
In May, Dutch Interior Minister Kajsa Ollongren agreed on measures with stakeholders including NVM, builders, real-estate developers and residents’ organizations to address shortages in the housing market.
Ollongren said the country needs 700,000 new homes by 2025, or an average of 75,000 a year. In Amsterdam, where a new city government is in power -- with new mayor Femke Halsema taking the helm later on Thursday -- the focus is on more affordable housing.
To reduce the housing deficit -- NVM estimates that the country has a shortage of 200,000 houses for sale -- Jaarsma told reporters the industry needs to build 85,000 homes this year to have any effect on the current market dynamics.
Still, he acknowledged that based on the number of houses sold by NVM members in the second quarter he doesn’t think the 75,000 goal will be reached this year due to a combination of some “weak parts in the chain” such as lack of available building grounds, materials and staff at builders.
While policy makers are trying to fix the lack of supply, it still takes an average of seven years in the Netherlands before a construction project is completed, said Philip Bokeloh, senior economist at ABN Amro Group NV.
“It will take a while before new initiatives start to bear fruit,” he said.
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