The average price of an apartment in Amsterdam fell 10,8% in the third quarter of 2012, and is down 17% compared to the same period one year ago. For actual houses, the average price has dropped 24,5%. The number of transactions is down 12,3%.

However, there are significant differences between Amsterdam’s neighbourhoods. For example, prices fell just 4,3% in the city centre, while in Westerpark prices actually rose by 2,9%.

According to real estate agent Almar Bakker, "The housing market is back to the price level of the end of 2004. That year there were 3.788 properties for sale and 1.438 were sold in the fourth quarter. At the moment there are 8.200 homes for sale and some 10% of them are being sold every three months.

What is selling is property with a good price / quality ratio. The rest of the market is static and is made up of homes whose sellers are asking too much. In that sector there is not really a market to speak of because nothing is happening with those properties.

And how prices develop in the future depends on the level of financing available. What would someone who bought a property in 2004 be able to finance now? We are trying to use those figures to estimate where prices will bottom out."

Mortgage advisor Henk Jansen of Expat Mortgages adds, "Banks are more careful with lending money. Since 2007, banks have reduced the proportion of salary that they believe can be spent on a mortgage.

At the same time, the margins that banks want on their mortgage loans have gone up massively. Despite lower interest rates (the Euribor and capital market rates have gone down more than 2% since 2007), mortgage interest rates have not gone down much. In 2007, people bought a new home before putting their old one up for sale. That situation has now reversed."

Nevertheless, Jansen sees reason for optimism, "It looks as if we may now have clarity about the tax break on mortgages. The cabinet’s plans state that people will still be able to deduct interest paid on their mortgage for 30 years, but only if they have a repayment mortgage."

The decision to permanently reduce the tax on property transactions from 6% to 2% is also positive, according to Jansen.

Henk Jansen is an Expat Service Provider with more than 20 years of experience in the housing / mortgages area. For inquiries and / or more info, comment below or visit Expat Mortgages.

This article was written in cooperation with Almar Bakker. Gerard W. Bakker real estate agency publishes a review of the housing market in Amsterdam proper (excluding greater Amsterdam areas such as Amstelveen, Diemen, Ouder-Amstel and Abcoude), including a district-based breakdown every three months.