Bubbles: that's what we like to drink most to toast a great deal. But if we're to believe the latest reports, 3 out of 5 first-time buyers expect the housing market to collapse. That the housing market is one big bubble. But we're also seeing a rise in the number of first-time buyers buying a house. The number of sales to investors in Utrecht has fallen.
Contents
- Biggest rise in house prices
- Mortgage rates
- Capital market interest rate
- Crisis
- Shares & crypto
- Extra pressure on the housing market
- Is the bubble going to burst?
- Conclusion
- Selling?
Source: Middas
Biggest rise in house prices
We currently find house prices bizarre & unacceptable. If you look at the rise in house prices since records began, you'll see that the rise in 1999 was the very highest. After that the decline set in. But homes didn't lose value. Prices always kept rising very slightly. Only in 2008, with the banking crisis, did homes really lose value. The biggest rises compared with the previous year were in 1999, at between 19 and 20% at the time. At the moment it's between 12 and 13%.
Source: Midas
Mortgage rates
Mortgage rates have fallen sharply since 2008. Because mortgage rates keep falling, homes have become more and more affordable. In 1999 CBS (Statistics Netherlands) wrote the following: ‘A buyer doesn't only look at the purchase price of a home. Besides the price, the mortgage rate also plays an important role in determining monthly costs. Over the past eight years the mortgage rate has fallen sharply: from nine percent in August 1990, the average mortgage rate has now fallen to 5.5 percent in August 1998. The fall in interest rates largely cancels out the adverse effects of the higher house price and the associated higher mortgage.’ You could see very clearly in the chart here that house prices rose as interest rates fell. Rabobank & ABN AMRO Bank recently lowered their mortgage rates again. This means homes have become even more affordable.
Source: Midas
Source: CBS
Capital market interest rate
Another very important factor is the capital market interest rate. This rate is currently even negative. This encourages spending rather than saving. Still, the capital market rate is starting to rise. But money above €100,000 in your savings account is now charged a negative interest rate. So people are even keener to earn a return. Investors will accept the 8% transfer tax. Mortgage rates are falling, or at any rate very low. House prices are rising, demand is high and supply is limited.
Source: Midas
Crisis
At the start of the coronavirus crisis I already wrote about the previous crisis. The credit crisis began in 2006. Only at the end of 2008, after a big peak, did it become visible on the housing market. But there was something fundamentally wrong with the financing. People were allowed to borrow a lot and didn't repay. Payment problems immediately led to big debts. Homes were under water as soon as they were bought. At the moment, homeowners with a new mortgage are required to repay, the interest burden is low and you have to bring some of your own money. The risk of big debts arising is smaller at the moment. You do see again that many people opt for a partly interest-only mortgage. This lowers your monthly costs. Half of the mortgage can still be interest-only. You're not entitled to mortgage interest deduction on that part. However, interest rates are so low that most people prefer lower monthly costs to lower overall costs.
Shares & crypto
You only have to open social media to see programmes for generating passive income. Many young people want to become financially independent. Just look around at your friends. Who doesn't have crypto? Many people have already earned quite a lot with it. You also see that they like to put their money into bricks and mortar. In Veghel, the first house has even been sold in Bitcoin.
Extra pressure on the housing market
There's been strong growth in single-person households. This puts extra pressure on the housing market. We need more homes for fewer people. In addition, since the coronavirus crisis we've been longing for bigger homes. We want space to work from home and more outdoor space.
Is the bubble going to burst?
I don't think so, not for now. We have around 32,000 house hunters. But we have around 700 homes on offer. Note: this includes new builds, homes under offer and homes sold subject to conditions. In reality, only 366 homes. Supply and demand are completely out of proportion. Savings cost money. Shares are high. Interest rates are low. Our pensions are uncertain. We want more space.
Conclusion
The housing market won't collapse. At most there'll be a small dip. After 7 fat years come 7 lean years. From 2015 the market really started to pick up. According to the cycle, 2022 should be a lean year. But because something fundamental has changed in the market, the rise will be smaller. But the market won't collapse completely like in 2009, with homes ending up under water. If you don't buy now, you'll pretty much miss the boat.
