House Prices Through Time: Insights from 200 Years of Amsterdam Real Estate History
Rico Nederveen
17 February 2025
Reading time 4 minutes
"Dröes, M.I., & Minne, A.V. (2015). Time-varying determinants of long-run house prices."
The real estate market today seems to move at breakneck speed. But what truly determines a home’s value, and how do these factors change over time? In a groundbreaking study conducted by Martijn Dröes and Alex van de Minne, nearly 200 years of data from Amsterdam are examined to answer precisely that question. The research reveals that the driving forces behind house prices are not static – they evolve alongside economic, social, and technological developments.
A Historical Perspective
From 1825 to the present, the historical price trends in Amsterdam demonstrate that the housing market has been driven by different factors over various periods. In the 19th century, population growth, construction costs, and housing availability were the main drivers. These variables determined home values at a time when Amsterdam was rapidly expanding and many of the historic buildings still stand today.
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As we entered the 20th century, economic factors such as GDP per capita and the emergence of the mortgage market began to play a larger role. After World War II, with the baby boom and the city’s post-war reconstruction, both housing demand and supply were radically influenced. The introduction of innovative financing methods in the 1970s eventually made interest rates and the cost of borrowing a crucial element in shaping property values.
The Methodology: A Dynamic Equilibrium Model
From 1825 to the present, the historical price trends in Amsterdam demonstrate that the housing market has been driven by different factors over various periods. In the 19th century, population growth, construction costs, and housing availability were the main drivers. These variables determined home values at a time when Amsterdam was rapidly expanding and many of the historic buildings still stand today.
As we entered the 20th century, economic factors such as GDP per capita and the emergence of the mortgage market began to play a larger role. After World War II, with the baby boom and the city’s post-war reconstruction, both housing demand and supply were radically influenced. The introduction of innovative financing methods in the 1970s eventually made interest rates and the cost of borrowing a crucial element in shaping property values.
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Evolving Drivers
The study highlights that the fundamental factors behind house prices – such as population growth, construction costs, income, and interest rates – are not immutable. They reflect the economic and social context of each era.
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The Value of Historical Data
By analyzing nearly two centuries of transactions, the study demonstrates how valuable historical data can be for understanding long-term trends in the real estate market. This perspective also helps to contextualize contemporary price increases and prevents them from being mistakenly labeled as mere “bubbles.”
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The Impact of Shocks
Major events – from world wars to economic crises – have a measurable effect on property prices. These external shocks can temporarily disrupt long-term equilibrium relationships, a factor that is important for both policymakers and investors to consider.
Conclusion
The research by Dröes and van de Minne offers a rich and nuanced view of the evolution of the Amsterdam housing market. It makes clear that the key to understanding house prices lies in grasping the shifting economic fundamentals. Whether you are a policymaker, investor, or homebuyer, the insights from this study help clarify the complex interplay between demand and supply, economic forces, and financing in the real estate market.
Want to learn more about how historical data and modern analytical methods come together to reveal these dynamics? Delve deeper into the world of real estate and uncover the hidden patterns that determine the value of your future dream home.
