Lots of people are wondering: ‘Is the housing market cooling down?’ But we also still often hear: ‘Oh well, good times for you as estate agents! People are overbidding like mad.’ The NVM wrote earlier that a breeze was blowing across the housing market. Has it stayed a breeze? Or is the housing market actually cooling down? We're happy to give you some insight into the current housing market in Utrecht.
Contents
- Home seekers
- Rising interest rates
- Stagnating new construction
- High demand for rental homes
- Long term
- Overbidding by a cool hundred grand
- Conclusion
Home seekers
At the start of the year we had around 32,000 home seekers in Utrecht and around 400 homes available. At the moment we have around 25,000 home seekers in Utrecht and no fewer than 1,200 homes available. So the number of available homes has increased enormously, while the number of home seekers has fallen enormously. This does suggest that the housing market is cooling down. At the start of this year we had an average of 35 viewings per home. The number of viewings had already been falling for a while. For a long time we had an average of 60 viewing requests per home in Utrecht. Sometimes even more than 100. Previously we saw an average of 20 viewings for the large family homes with a big garden, but most homes now don't get beyond 5 viewings. Huge differences in a very short time.
Across the Netherlands there were 35,940 transactions in the second quarter of 2022. The average price per square metre was €4,040. In total there were around 25,000 homes available. An increase in supply of 42.1% compared with the second quarter of 2021.
In the municipality of Utrecht there were 1,045 transactions in the second quarter of 2022. The average price per square metre was €5,576. In total there were 591 homes available. An increase in supply of 76.5% compared with the second quarter of 2021.
More than half, around 52.9%, of buyers in Utrecht city are first-time buyers. Quite remarkable given the high prices in Utrecht.
Rising interest rates
I wrote earlier that the solution to the overheating of the housing market was rising interest rates. You can now see this coming true.
Mortgage rates rose rapidly this year. There's unrest in the world because of the war in Ukraine and inflation is extremely high. Together these partly explain the rising rates. In June, Rabobank's Basis mortgage stood at 4.41% fixed for 10 years, at 100% loan to value. In January it was still 1.8%. The rate for Rabobank Basis now stands at 4.01% fixed for 10 years, at 100% loan to value. You can see that demand for mortgages started to fall sharply from July.
In recent years demand for mortgages rose enormously. This was driven by historically low interest rates. The higher rates are bringing that situation to an end. The rise in rates means a much higher monthly payment. But not only that: with a higher rate you can simply borrow less, too.
Because of rising mortgage rates, the monthly cost of a home of around €650,000 is now about €750 a month more than at the start of this year.
Worked example:
With a mortgage rate of 1.8%, you paid around €2,338 gross per month for a mortgage of €650,000.
With a mortgage rate of 4.01%, you pay around €3,107 gross per month for a mortgage of €650,000.
A monthly payment of €769 simply equates to a mortgage of €200,000 at 1.8% interest. Of course this includes some repayment, and you also still get mortgage interest relief.
But this calculation already shows how ‘EXPENSIVE’ homes have simply become because of the rising rates. After all, you don't see houses suddenly becoming worth €200,000 less. But you do see prices in Utrecht falling sharply for homes that aren't ‘sleek and finished’ or that don't have large rooms and a nice garden.
Variable interest rate
Do you believe interest rates are going to fall sharply? Then choose a variable rate. That way you can fix a lower rate again as early as next year. Get good advice on this from a financial adviser. They can tell you what a smart move would be.
Stagnating new construction
Building costs are rising sharply. But Hugo de Jonge's wild plans are also bringing housing development to a complete standstill. The sums no longer add up. As a result, there are no investors left who want to burn their fingers building new homes. Redevelopment is also becoming less and less attractive because of ever-rising building costs. Recently we were having drinks with a contractor. It took him around 5 years to get the permits for a small new-build estate. The municipality there let everything drag on for ages. Objection upon objection upon objection. Everything kept being postponed. In the end, building costs have now risen so far and sale prices are under so much pressure that this contractor is really fed up. So it could easily turn out that he has incurred a great deal of costs and in the end won't build the 30 extra homes, because he doesn't want to risk incurring even more costs. He won't be the only one. I fear we're doing the same thing as in 2008. We're bringing house building to a halt. Soon we'll have even more people with even fewer homes. I also wrote earlier that our homes are simply too big. Besides the fact that we each occupy too many square metres, we'll soon have an even bigger shortage if we let house building stagnate now.
Quote magazine already wrote that, this way, buying a home really is reserved for the rich.
High demand for rental homes
We often talk to letting agents. Those letting agents are run off their feet. Around 100 applications for a one-bedroom rental home at €1,750 in Amsterdam is nothing unusual. This is due to the opkoopbescherming (the buy-to-let ban). The supply of rental homes is shrinking in the popular cities, while buying is still becoming harder for first-time buyers. It all sounds very tenant-friendly that rental homes are getting cheaper. But the government isn't the party that builds and runs the houses. In fact, the municipalities charge extreme amounts when they release land. The rules would only work if they didn't slow down house building. What's also quite shocking is when you think about our pensions. A lot of our pension money is invested in property. Big players such as Syntrus, Achmea & ASR have fine property portfolios that they run. The return they make on them is needed to fill our pension pots. Just imagine what will happen to our pensions if no return can be made on property any more. These parties already have plenty of social housing, and they can keep running that. But it's precisely the somewhat larger apartments in the private sector that make projects profitable and ensure there are apartments for several target groups.
Long term
Ask yourself carefully: ‘Over what time frame am I buying a house?’ and ‘Could the house be easy to let, should I go and live somewhere else?’
The jubelton (the tax-free gift of up to around €100,000 for buying a home) will disappear in the short term. Do you have a lot of your own money? Then right now is the moment to buy a house. In absolute terms, house prices are now slightly lower than a few months ago. Do you only need a ‘small’ mortgage? Then you'll be considerably better off in absolute terms.
Are you buying your first home now, and do you have big career plans? Do you dream of an even bigger house? Then a fall in prices is no great disaster. When you consider that 10% of €300,000 is a much smaller amount than 10% of €900,000. Then it can even be advantageous to buy a new house in a bad market. Had you already thought about this? Property always pays off in the long term. Over all the years, property has always increased in value. Make sure you take on a monthly payment that you can afford at all times. Then you're always safe.
Overbidding by a cool hundred grand
At the moment there's less overbidding. But does that automatically mean prices are lower? In Utrecht you saw that homes with a realistic asking price usually didn't attract anyone to viewings. As a result, a home was often listed with an asking price about €100,000 below market value. The overbids then seemed enormous but in fact weren't that bad at all, and even if you overbid by more than €100,000 you were still buying the home at market value. The latest NVM figures show that in the municipality of Utrecht people overbid by an average of 4.5% in August so far. In July the average overbid was 5.4%.
I've also taken a careful look at all the data for the city of Utrecht myself. In it, the average overbid was still 10%. Strangely enough, in one of the busiest price ranges, between €500,000 and €600,000, the average overbid was only 6%.
Source: BRAINBAY NVM
This month the average price per square metre is lower than the year before for the first time. Up to April, prices kept rising very sharply. In Utrecht you saw a slight fall from February and a sharper fall from April. Regionally the differences are very large.
Conclusion
Is the housing market cooling down? The housing market is cooling down a little. But demand is still high and interest rates are historically low. We expect rates to fall somewhat again. But above all, we expect that in a few years we'll have an even bigger housing shortage. Hugo de Jonge's plans are disrupting the housing market further. The pressure will be greater than ever. It's smart, especially if you have your own money, to put it into your own home. Property has always been a good weapon against inflation. In addition, property is always a good investment in the long term. Take advantage of the fact that you have more choice at the moment. Sometimes you still have to overbid all out, but now you can also pick the best of the bunch. You can take a little more time to find your dream home and buy it at a sharp price. We're happy to help.
