Diffusion and Risks of House Prices in the Netherlands

The rate of home-ownership has increased significantly in many countries over the past decades. One motivating factor for this increase has been the creation of wealth through the accumulation of housing equity, which also forms the basic tenet of the asset-based welfare system. In generating the home equity, house price developments play an important role. Generally, house prices show an increasing trend over long time period, however, there are short term negative appreciations that may have inherent risks for the housing equity. Following the 2007-08 Global Financial Crisis (GFC), for example, the collapse of house prices has caused many recent home buyers to run into negative equity. Some housing researchers and experts have suggested that a better understanding of the spatial diffusion mechanisms of house prices will aid resuscitating the housing market after the GFC. Others also advocated adopting insurance schemes to protect the home equity that yields the welfare benefits. Unfortunately, however, little research insight exists on the Dutch house price diffusion process, although there are empirical results for countries such as the UK, US and China, where the contexts differ from the Netherlands. Furthermore, the current existing home-value insurance scheme in the literature is found to be less efficient and eliminates only up to 50% of the house price risks. This dissertation covers important aspects of house price diffusion and risks in the Netherlands. The aim is to better understand the diffusion mechanism and the risks of house prices, while it also contributes to the measurement of these housing risks. More specifically, there are three objectives: first, to discover the diffusion mechanism of house prices in the Netherlands and the pattern particularly from the capital Amsterdam; second, to examine the spatial distribution of the house price risk; and third, to investigate the efficiency of the index-based home-value insurance for reducing the house price risk in the Dutch context.