The housing market in Utrecht: even on our holiday, it was a pressing question for many of the people we met. Interest rates have gone up, so house prices must be falling, surely? At a wedding in Italy there were also some of our clients. They were curious: was the deal they'd done actually a smart one? Were we actually busy, or did we have three weeks' holiday because there was simply nothing to do?
Contents
- The housing market in Utrecht
- Utrecht leads the way in falling house prices
- New-build is lagging behind
- House prices are falling
- The figures in Utrecht
- Conclusions
The housing market in Utrecht
Actually, there isn't really one housing market. You have a market for owner-occupied homes and one for rental homes, and there's also overlap with the surrounding villages. But interest rates, demographics and consumer confidence also matter in the housing market. The price of a house depends on a great many factors. Including trends and culture.
But just to give you an idea of the size of the Utrecht housing market:
159,671 homes in Utrecht, of which 44% are owner-occupied, 32% are rented from a housing association and 24% from other landlords
Of those 159,671 homes, 43% are single-family homes and 57% are apartments
72% of those 159,671 homes were built before 2000. The remaining 28% were built after 2000.
And then there's the demand side of the Utrecht housing market:
21,425 serious searchers in Utrecht
1,293 homes on the market (including those under offer, sold subject to conditions and under option), of which 352 existing homes and 388 new-build homes are still available.
Of these searchers, 8,809 people are looking for an apartment and 12,616 for a house. There are 205 apartments and 147 houses available.
That means that…
Lots and lots of us are looking for a home, and preferably an owner-occupied one too. We only have 70,255 owner-occupied homes in Utrecht. Of those, only 30,210 are single-family homes. And 12,616 people are looking to buy a single-family home. The largest group is also looking for a home with 5 bedrooms, 125+ m² and a maximum of €500,000. The average transaction price of a terraced house is €5,192 per square metre. The requirements and the budget are then around €149,000 apart. And you'd need an income of €133,500 gross a year at a mortgage rate of 4.9%. Well, that's quite a hefty salary… And that for a house where you can simply fit your family.
Utrecht leads the way in falling house prices
That was the headline at RTV Utrecht in April. Utrecht had the sharpest fall in house prices. Utrecht saw a price drop of 7.4%. In Utrecht we were dealing with the opkoopbescherming (the rule that stops investors buying up cheaper homes to let them out), rising interest rates and old houses combined with rising energy prices. People were waiting it out; they didn't want to buy in a falling market. They had seen prices rise rapidly as interest rates climbed rapidly. Because of rising energy prices, lots of people chose to look into new-build. However, because of rising construction costs, the nitrogen problems (environmental rules that stalled construction), rising interest rates and uncertain completion dates, many people dropped out of new-build again. It simply took too long and new-build prices were too high.
New-build is lagging behind
Hugo de Jonge had ambitious plans for public housing. New rules for letting came in, the opkoopbescherming was introduced, rents had to come down and lots of affordable homes had to be built. At the same time, interest rates kept rising. Affordable homes seem further away than ever… And building additional homes is going very slowly. The media are now reporting that building projects are being postponed:“Demand for new-build flats is falling, entire projects are being cancelled” & “Investor interest in new-build is declining”.
Builders make a small loss on social rent. For building a social rental home, the proceeds don't cover the construction costs. With affordable owner-occupied homes and mid-rent, a builder breaks even, and the profit is made in the more expensive segment. If sales of the more expensive homes fall away, the earnings model of a new-build project disappears too. Because of the changes in our rental system, rental homes are entirely loss-making and it isn't possible to build, while the permit often requires a large share of social rent and mid-rent. The other homes become so expensive by comparison that they become too expensive for the buyer, and for an investment fund a negative operating result isn't an option either.
House prices are falling
More and more often I get a WhatsApp along the lines of: Lin, what's going on? I read and hear everywhere that house prices are falling, but then prices in Utrecht rise. When are house prices in Utrecht actually going to fall? Maybe the segment we work in also gives a distorted picture. Homes up to around €550,000 are hugely in demand, and people in this price category usually aren't moving from a position of enormous luxury. They really need a house to start a family or to get started.
ABN AMRO even thinks prices will fall by another 5%. Last May, mortgage rates rose enormously. Energy prices shot up and house prices in Utrecht dropped very sharply. The price fall we referred to above is a somewhat distorted picture. They calculate using Kadaster data. That always lags a little behind. The average time to completion is around three months. So the Kadaster always lags around three months behind. In May, prices suddenly fell by around 10 to 15%. After that, prices kept falling slowly. Interest rates rose steadily. November, December, January and February were tough. There was lots of supply and a lot of uncertainty. Interest rates began to stabilise, and by then everyone had got a bit used to inflation and the huge energy prices. People had negotiated their salaries and there were the biggest CAO pay rises (under collective labour agreements) in 40 years. Thanks to rising wages, there was a bit more borrowing capacity.
During the summer holidays my nephew called me. He wanted to make an offer on a house. A nice house, relatively new, completely neat, with a nice kitchen, near Nijmegen. On the boat I sat working everything out, and I called Moreno Joosten and Danielle de Rooij, two estate agents in that area, for advice. The home could be valued at a maximum of €305,000, and only just… I advised him to bid just a little higher. But bam, the home went for around 10% over asking. A higher asking price than in the heyday. I spoke to the selling agent, who said prices there had hardly fallen at all and that nice family homes were now rising sharply again.
The figures in Utrecht
The figures from Gemeente Utrecht (the municipality) at a glance. These figures are somewhat more conservative than those for the city of Utrecht, but unfortunately I don't have the data for the city itself. The tightness indicator was 2.4 in the last quarter of 2022. At the moment it's 1.8, and in the last quarter of 2021 it was 0.9. So tightness in the housing market has decreased considerably, but at the same time it's now increasing considerably again. In the second quarter of 2021, 1,102 homes were put up for sale. In the second quarter of 2022, 1,384 homes were put up for sale, and this year 1,022. So we have just slightly fewer homes than at the peak of the market. And what about overbidding? In Q2 2021, a transaction price above the asking price was achieved in 88.7% of cases. In Q2 2022 this was 92.7%, and this year it's only 53.6%. For years, square metre prices kept rising compared with the year before. Now prices are still just slightly lower than the year before. Even so, we see in the market that good-looking homes up to around €550,000 are rising in price. I expect that in two quarters' time we'll see a big rise in the tables.
Conclusions
Sorry, dear searchers: prices have fallen very sharply in Utrecht, but the rise has already started again. People in Utrecht are overbidding en masse again. At the start of the year I wrote a blog: ‘The housing market in 2023: what will it bring us?’. In my conclusion I wrote that I thought people would want to move forward after our Covid years, when our lives felt as if they'd stood still. I also thought a balanced market was coming. And that was the case, for two, at most three months. But after that everything shot up quite a bit. You do see that apartments that are a bit smaller, or that have little or no outdoor space, get somewhat less demand. But it's precisely the houses that go with making plans and starting or raising a family where we see the pressure increasing enormously.
At the end of 2022 I wrote a blog: ‘Housing market 2022, what a year!’ My conclusion was: ‘I would buy a home myself. You pay off a good chunk of the loan. At the moment the housing shortage is still growing. As soon as inflation falls a bit, construction costs stabilise and interest rates fall a bit again, we'll have a problem in the housing market that I have no idea how to solve. If you enter the housing market now, at least you can build something up. For the first few years, don't see your home as a property investment with a return, but simply as a lovely house you're going to live in. Don't compare yourself with friends who gained €100,000 in surplus value in 1 or 2 years last year, but look for a house that suits you and where you can stay for a while.
In a few years you'll be grateful you bought. Because in 8 years the problems in the housing market will be beyond comprehension. By then interest rates will have fallen a bit again, and demand will be greater than ever!’
And what do I think now? I find it difficult. The government's housing policy is only making scarcity worse. Our population is growing, and we're getting more and more single-person households and broken and blended families. The need for extra housing is great. On top of that, a large part of the Netherlands really lives in homes that are too big. Construction costs keep rising and we have a hugely ageing population, which is making life more and more expensive. So I think we're going to spend more money on our housing costs, but that, simply because of the large shortage and our generous lending standards, house prices will keep rising. The raised threshold of the starters' exemption from transfer tax, to €510,000, will mean that precisely the family homes in Utrecht that are now stuck at around €440,000 will go well above that, so there will be growth in house prices in this category, which will trickle through to the higher segment because of the proceeds from these owners' current homes.
So I wouldn't wait for better times, but get good advice. What is the house worth, how much can and do you want to spend per month and, even more importantly: ‘What will really make you happy?’ I fear that in 5 years homes will be completely unaffordable. And a house is for living in, and you have to feel at home there. It's not a cash cow.
Would you like to buy a house? Then take a look at our listings. Or come and have a cup of coffee for advice on buying a home.
