Unfortunately I too was in self-isolation at home this week. I had a fever, was coughing and was extremely short of breath. My GP said it was corona, but that tests were no longer being done. Fortunately, against all advice, I had done a bit of hoarding after all and had a week and a half's worth of food in the house. Thankfully I'm on the mend. No more fever, no more coughing. Then you're allowed out again after 24 hours. To be on the safe side I'm staying home a few extra days, so I don't run any risk of infecting anyone. The virus and self-isolation force you to do your work in a different way.
Contents
- FaceTime purchase meetings, photo shoots and viewings
- Estate agents for estate agents
- How a crisis affects the housing market
- The stock market crisis of the ’30s
- The oil crisis of the ’80s
- The subprime credit crisis of 2008
- Changes to mortgage rules in Utrecht
- What's happening now? A health crisis
- House prices
FaceTime purchase meetings, photo shoots and viewings
This week, for instance, I bought a home for a really lovely couple with the help of a FaceTime viewing. My client showed me everything. I asked her to check a number of things for me. To point the camera properly at things I had doubts about. Gave her tips and tricks. Not ideal, but effective. This week I did a number of viewings this way. But I also held a purchase meeting this way. Via ZOOM.nl you can hold purchase and sales meetings. The photo shoots went ahead remotely. Robert van Rooijen, our star from VistaView, walked through the home together with me. Together we decided what still needed to be arranged differently, how it should look in the photos and from which angles the photos should be taken. A face-to-face conversation is always nice. But right now we have to make do with what we've got
Estate agents for estate agents
A Facebook group called Makelaars voor Makelaars (Estate Agents for Estate Agents) was set up, where agents share tips and tricks for keeping their work going as creatively as possible. There are already agents who let viewings take place without an agent, using a Wi-Fi-controlled lock, to prevent infections. There are agents who do viewings via FaceTime, let people make an offer on that basis and then do go and view in person with the three best bidders. Some agents only do virtual viewings now, or are waiting to hold viewings until after 6 April. Most still choose to show a home in person. With the necessary precautions. No more group viewings, just enough time to see the house. A house is certainly no packet of butter, after all. So for the time being we'll also keep holding live viewings of our homes. What do you prefer at the moment?
How a crisis affects the housing market
During the time I was stuck at home I tried to work a lot, alternated with sleeping. But above all I did an awful lot of research. What will the impact of the coronavirus crisis (a health crisis) on the housing market be? How did other crises play out, and what are the similarities and differences with this crisis?
The stock market crisis of the ’30s
In the ’30s there was a major economic crisis (stock market crisis), just after the First World War. There was great poverty here. The great financial crisis started in the United States. The economy had grown far too fast and a stock market bubble had formed. The huge stock market crash put banks under pressure. This caused problems and unemployment rose to 25%. The government responded incredibly slowly. In America they started making huge cuts to government salaries to balance the budget. For the Netherlands it became problematic because there was too little international trade. The Netherlands also clung to the Gold Standard for too long. As a result, the Netherlands had become too expensive compared with other countries. The Netherlands shut itself off from other markets, while those were precisely the key to success.
The oil crisis of the ’80s
In the ’80s there were two oil shocks. The supply of oil was deliberately and artificially restricted. Wages were relatively high in the ’80s and there was a good social safety net. Prices also rose because of the higher prices producers charged due to the oil crisis. This led to a higher price level. This led to high inflation. Fighting inflation by raising interest rates led to a global recession. The generous welfare state couldn't cope with all those unemployed people, which was partly why public finances were out of balance for a long time. On top of that, at the end of the seventies the Netherlands had its own ‘subprime’ crisis in the housing market. People could take out a bigger mortgage based on expected future income increases. Often on a variable rate, too. When interest rates went up, many people became unemployed and automatic price compensation was scrapped as well, it led to major problems. In the end it resulted in a drop in house prices of more than 35%.
The subprime credit crisis of 2008
As in the ’30s, this crisis began in the US. The American housing market had already picked up a lot of steam at the end of the nineties. The economic downturn after the dotcom bubble burst also seemed set to cool the housing market. Because of low confidence in the economy and high inflation, America had started cutting interest rates. This was to bring everything back into balance. But the aggressive rate cuts achieved the opposite. House prices rose even faster than during the dotcom bubble. The housing market became overvalued. The surplus of money in the economy translated into enormous pressure to lend. All that money had to go looking for a return. They called this the Search for Yield. Mortgages were granted to people who most probably would never be able to repay them. These mortgages had variable rates and attractive introductory rates. In the Netherlands at that time, the buyer's costs could also still be financed as part of the mortgage. In the US that wasn't possible, but new initiatives emerged there for that too. There were lots of interest-only mortgages. A kind of NHG (the Dutch National Mortgage Guarantee), but with a second mortgage at a higher rate. There were also mortgages that first offered an interest discount and then raised the mortgage rate. As a result, more and more Americans ran into payment problems. The houses had to be sold under duress. This made house prices fall enormously. In addition, thanks to the low interest rates, many Americans had bought extra houses as a speculation to make a profit on later. As a result, the global economy slumped. In the Netherlands, homes were also over-financed. Because of job losses, people here also ran into financial problems. The housing market collapsed completely.
Changes to mortgage rules in Utrecht
At the moment in the Netherlands we can only borrow 100% of the market value, and no longer 125% of the purchase price. In addition, a number of things are taken into account when assessing whether you can get a mortgage:
- Having an overdraft facility
- Your credit card spending (not if you pay it off monthly), revolving credit, store card
- Your personal loan
- Bike scheme
- Personal loan
- Products bought on instalments
- Student debt
- Phone contract with a handset
- Leasehold
We're only allowed to take out an interest-only mortgage to a limited extent. In addition, what you can borrow depends on the fixed-rate period. The second income can no longer be counted in full. On top of that, thanks to the low interest rates we're all paying off a lot on our homes. So the ratio between the borrowed money and the value of the home has improved. Thanks to the stricter rules, the monthly payments are much more affordable.
What's happening now? A health crisis
Businesses have ground to a halt. As I described earlier, the stock market took heavy blows. Restaurants and bars are closed, as are schools and sports centres. Everyone is staying indoors and the planes are grounded. Many people are dying and many countries around us are in lockdown. The economy is ticking over very cautiously. Everyone is rallying en masse behind the hospitality sector and small businesses. Property owners are trying to accommodate retailers with payment deferrals. Banks are easing credit and the government is stepping in. Businesses should now get the same state support as the banks did during the economic crisis.
The coronavirus crisis also has consequences for the Dutch housing market. Housing market economist Carola de Groot: ‘The measures to contain the virus outbreak, including closed schools and the call for social distancing, can make it harder to view a house.’ According to the economist, this, together with the drop in employment and income, may temporarily reduce demand for owner-occupied homes. People are anxious. Is the same thing going to happen as in 2008? De Groot: ‘Later in the year we expect the large shortage of homes and low mortgage rates to gain the upper hand in the housing market again.
In short:
- We can thank China for showing how the coronavirus can be fought.
- Europe is following the path of the Chinese province of Hubei: as a result, the economic impact is greater than for China as a whole.
- Yet economic hardship is easy to prevent: businesses must be compensated generously.
- This kind of helicopter money gives the economy an extra boost. Source: Business Insider
It affects the whole world. Not just the Netherlands. That may be an advantage for our economy. Still, the Netherlands is very vulnerable. We do a lot of trade worldwide. Our economy will really take a beating. Europe is at increased risk of a recession. Uncertainty is increasing and interest rates will fall even further. Our cabinet is choosing to apply support measures, such as continuing to pay most of employees' wages, which will cost between 10 and 20 billion euros next quarter. Businesses can also get tax deferrals. As a result, 35 to 45 billion euros less will come in over the coming months.
Because the cabinet is choosing not to make cuts, extra money will have to be borrowed in the coming period. “Of course all of this has consequences for the national debt,” Hoekstra acknowledges. “We can bear that, because public finances are in order.” This kind of helicopter money gives the economy an extra boost. It prevents bankruptcies and ensures social stability. As a result, the economy can recover fully once the virus outbreak is behind us. The cabinet is prepared to take far-reaching measures so that as few businesses as possible go bankrupt and as few people as possible lose their jobs.
House prices
Fear leads to less confidence. Growth in the global economy will be affected. The global economy will grow less quickly. But thanks to the stricter mortgage rules and the better ratio between value and amount borrowed, the blows to the housing market will be smaller than in 2008, should people lose their jobs after all. Thanks to the large support package, many businesses will stay afloat and, once the uncertainty is over, demand for homes will remain undiminished. I expect house prices to keep rising a little less quickly right now. Possibly rising slightly. But once the world calms down again, prices will most likely rise. Nobody knows how it will play out. No guarantees can be derived from this blog. But that's the conclusion my week of research has brought me to. Nobody knows what the right move is right now. It could be smart to buy a house precisely now, while fewer viewings are taking place. But it could also be smart to sell right now. Because what if the market collapses?
Let's have confidence, and let sellers know that you're looking for a house! Now that you have to stay indoors so much, you want a lovely home, don't you?
