Is the housing market really cooling down?

The interest rate has risen sharply. In January last year, the rate was still around 1.8%. At the moment, the rate is 5%. Last year, the gross monthly cost of a €400,000 mortgage was still €1,439 a month. At the moment, the gross monthly cost is €2,147. The monthly cost is around 50% higher. So you're now paying 150% of last year's gross monthly costs. Prices in the city of Utrecht have fallen by 15% to 20%. So relatively speaking, prices per month have risen enormously. But in absolute numbers, home prices have fallen.

In January last year we had 32,000 serious searchers and around 600 homes for sale. At the moment we have 19,750 serious searchers and around 1,465 homes. Many more homes and far fewer searchers. Even so, we can see the number of searchers rising again. In the summer we had only 13,000 searchers, and a supply of 1,300 homes. Over the summer the interest rate was around 5.5%. The rate keeps rising slightly and then falling slightly again.

In January, house prices rose

The news said: ‘CBS: house prices rose surprisingly in January’. Personally, I don't find that so surprising. As of 1 January 2023, the transfer tax exemption went from €400,000 to €440,000. So prices were higher than in December. But how strange is that? If you bought a home in December with a transaction price of €440,000, you had to pay €8,800 in transfer tax, and in January you didn't. As a result, homes with a transaction price between €400,000 and €440,000 were transferred (the handover of the keys at the notary) in January. That's why you saw a rise in the transaction price. But the NHG limit (the National Mortgage Guarantee) also went up, to €405,000. In 2022 the limit was still €355,000. So you can see that a number of transactions were pushed back, which is why you saw a rise in transaction prices in January. The CBS (Statistics Netherlands) only counts transactions from the moment they are registered with the Kadaster (the Land Registry). We work with the NVM figures, using the date a sale is reported in the system. That's why the CBS always lags a bit behind.

What do we notice in the housing market every day?

At the start of this year I wrote a blog: The housing market in 2023: what will it bring us? The number of searchers has fallen. We don't want to buy in a falling market. Lots of searchers hit the brakes and stopped looking. But of course those searchers haven't disappeared completely. We notice that overbidding is almost entirely a thing of the past. People are bidding below the asking price again. We see that the energy label and sustainability have become much more important. The 1930s home is still popular, but viewers do want to know what can be done in terms of sustainability. Right now, a well-insulated apartment in a less charming complex is more popular than a 1930s upstairs flat. We would never have believed that last year.

We see more searchers coming. Viewings are getting a bit busier again and people are getting used to the prices. We have to live somewhere, after all, and the plans of Hugo de Jonge (then the Dutch housing minister) are making renting a home harder and harder too. New-build is lagging behind and our net migration is rising. I expect the housing shortage to get even bigger. In a few years, prices will go through the roof. The housing shortage will then be even worse than we can imagine now. So I don't think buying a home at the moment is a bad plan. If anything, it's an investment in the future. At the start of this year I wrote: ‘I expect interest rates to remain stable. Sometimes they'll fall slightly and then rise a bit again. We're getting the market we've been longing for. Only it turns out that homes are still horribly expensive and your wishes are still €100,000 above your budget. That's something of all times, and it will stay that way. But we have more time to think.’

NVM data and outlook

Today we've also received the latest housing market figures from the NVM. The average price per square metre for the whole Utrecht region fell by 12.7%. The number of transactions in February also fell by 12.7% compared with February last year. Transaction prices are around €10,000 higher than in 2021. But on average €66,000 lower than in February last year. Detached houses were scarce for a long time. But now we see that it's precisely the detached houses that are selling less well. Could that be because of rising energy costs? The time homes spend on the market has more than doubled. On average, a home is now for sale for 45 days. Last year, buyers overbid by 12.7% on average. Now, on average, offers come in 1.6% below the asking price. These figures are for the whole Utrecht region. The figures we usually share are for the city of Utrecht. We see that prices have fallen, but we also see that the housing market is getting busier. Will the figures become rosier again? We expect the housing market to stabilise.

Update January 2025

The fact that so many people search for ‘Is the housing market really cooling down?’ means people are wondering about this question. Supply is increasing sharply. In January last year there were 352 homes on the market. Now there are already 443, and we're only at 23 January 2025. An increase of 25.9%. Last year, homes were on the market for 22 days on average, and that's now just slightly shorter at 21 days. In January last year, the average transaction price per m2 was €5,791, and now it's €6,499. A rise of around 12.2%. So as far as we can see, prices have still risen sharply.

A quick look back: how did 2024 go?

Despite what some expected, 2024 turned out to be anything but a quiet year for the housing market. Whereas transaction prices cooled slightly in early 2023, in April we saw the market start rising again and demand increase. In 2024 it was a scramble again, just like the old days. The average transaction price per square metre in Utrecht rose by no less than 12.2%, from €5,791 in December 2023 to €6,499 in December 2024. Apartments took the lead, with a transaction price per m² of €6,634 in December 2024.

The number of transactions also rose remarkably, with peaks in the summer months and a slight levelling off towards the end of the year. This points to a market that has become overheated again, despite higher interest rates and economic uncertainty. Still, interest rates also fell slightly again. That improved affordability. The tightness indicator remained stable at 1.2, which means there was little supply per potential buyer.

What's happening now?

A striking phenomenon with a big impact on the housing market is investors selling off their rental properties (uitponding). Because of the Wet Betaalbare Huur (the Affordable Rent Act), the obligation to sign rental contracts for an indefinite period, and the announced measures in box 3, many investors have decided to sell their properties. These are often apartments with a less luxurious finish, slightly larger floor areas and less sought-after locations. For example, a small apartment in Overvecht with a shabby kitchen and bathroom. Because of this mass sell-off, we see that the number of transactions has increased sharply, especially for apartments. The price per m2 has risen sharply, but could have been even higher if all these sold-off apartments hadn't been in the mix. Because the quality of these apartments is often a bit lower and the locations a bit less attractive, the prices per m2 are relatively lower.

Another development since October 2024 is a slight fall of 0.1% per month in transaction prices, as the Brainbay market reports show. This may indicate that first-time and second-step buyers who still wanted to benefit from the jubelton scheme (a one-off tax-free gift towards buying a home) completed their transactions before December (transfer at the notary). This created extra pressure on the market up to October, with first-time buyers often bidding a little higher to improve their chances and so avoid gift tax. The first figures for January 2025 confirm what many already felt: the housing market in Utrecht remains overheated. The average transaction price per m² is now €6,453, a slight fall compared with December, but still substantially higher than a year ago. Every year we see that transaction prices in January are just slightly lower than in December. The number of transactions shows a similar cyclical movement: a dip after the December rush, as we see every year.

What stands out is that apartments are still showing the biggest price rises, while terraced and corner houses have reached a more stable price level. Detached houses, always a segment with a lot of fluctuation, keep swinging in price and transactions.

Cyclical dynamics: the pattern continues

The housing market follows a rhythm as if it mirrors the seasons themselves: a spring full of peaks in prices and transactions, followed by a quiet autumn in which buyers and sellers catch their breath again. As we like to joke: you shouldn't sell in the summer season, when we want to go sailing, and in winter we can go skiing. Those are the rare moments when the market is a bit quieter for a while: from mid-December to mid-February and from mid-July to the end of August. That, by the way, is just the moment to buy a home. This dynamic is reinforced by the limited supply and continued demand, especially among young families and first-time buyers who want to settle in Utrecht.

What does this mean? Spring 2025 will probably show another peak in prices and transactions. For buyers, this means the coming months will bring extra pressure, while sellers can benefit from increased demand.

The influence of Trump and Germany on the housing market

I once had a date. I made a joke about Trump and he seriously had no idea what I was talking about. Then I thought: okay, this isn't going anywhere. Because that old orange man with his quiff does have quite a lot of influence on how things go in the world. Although the Dutch housing market is largely determined by domestic factors, international developments also play a role. But what kind of influence does Trump have?

Firstly, his policies could lead to higher interest rates in the United States. The Federal Reserve may be forced to raise rates as a result, which in turn affects interest rates worldwide. For Europe, this means the European Central Bank may follow the same path, which could also push up mortgage rates in the Netherlands. A rising interest rate puts pressure on housing affordability and can dampen demand over time.

In addition, the exchange rate of the euro against the dollar is an important point. Trump's policies, such as tax cuts or trade restrictions, could strengthen the dollar. A strong dollar makes European exports less competitive, which puts extra pressure on economies such as Germany's, which rely heavily on exports. This could also hit the Netherlands indirectly through reduced trade and investment.

As for Germany, Europe's largest economy: the ongoing economic contraction and weak growth forecasts for 2025 (only 0.3%) are making investors nervous. Falling demand for German exports from China, among others, reinforces this effect. This may lead to more caution among international investors in the Dutch property market.

Although a full-blown crisis isn't likely, together these factors could create extra uncertainty in the housing market. Although the Dutch housing market is largely determined by domestic factors, international developments also play a role. The economic impact of former president Trump has had global consequences, particularly through geopolitical uncertainty and trade wars that affect the world economy. As a result, investors more often look for stable markets, such as Europe and specifically the Netherlands. This may have contributed to the continued demand for Dutch property, despite rising interest rates.

In addition, the shrinking German economy, Europe's largest, plays an indirect role. With a contraction of 0.2% in 2024 and weak growth of only 0.3% expected in 2025, export demand is falling, which could also affect the Netherlands. This economic pressure could make investors more cautious and possibly affect confidence in the housing market. Although a direct crisis isn't expected, this situation could further complicate the market's dynamics.

A wave of emigration

I hardly dare say it out loud. But what I'm a little afraid of myself… is that more and more hard-working Dutch people have had enough of the regulatory burden in the Netherlands. They go looking for freedom. Lots of investors and entrepreneurs are moving to Spain, Portugal and Dubai. But we do have a large influx of people coming into the Netherlands. However, these are mostly people who make use of the facilities in the Netherlands. But if the wealthy Dutch leave, who's going to pay for it all then? I know I'm not making myself popular with this statement. But I actually think this is going to be the biggest problem. There's more and more demand for housing, but who's paying for it?

It always makes me think of the meme people used to share on Facebook just before the elections when they wanted to promote the VVD (the Dutch liberal party). Ten people are sitting at the bar. Number 10 always pays 52% of the bill. He also earns far more than the rest. He's happy to do it; he's fine sharing with his mates. The rest pay the remaining part of the bill. Then the ones who earn the least rebel. They don't think it's fair. Because, relatively speaking, they pay much more. They think number 10 should pay more, because he has enough. Number 10 doesn't mind paying a little bit more. But he's not going to pay the whole bill. They fall out. Number 10 stops coming. Suddenly the other 9 realise that, between the 9 of them, they can't even pay half the bill… Damn. That was a bummer. Now they couldn't go anymore.

I'm afraid that in a few years we'll be at this point in the Netherlands. That we'll find out that, in all our greed, we've driven number 10 out of the country and we can't even pay half the bill anymore. Those number 10s will then be paying half the bill somewhere else.

What else do we expect for 2025?

The housing market is expected to remain under pressure this year as well. Although economic conditions and rising interest rates have a somewhat dampening effect, demand for homes in Utrecht remains high. The central location, the city's popularity among young people and the limited supply of new-build homes all contribute to this.

The biggest challenges lie with first-time buyers, who often run into high prices despite a slight increase in borrowing capacity. They also can no longer use the jubelton. Even so, there are still plenty of options for making use of the wealth of parents and family. You can always discuss this with, for example, Wietske at Koch Notarissen. Investors, on the other hand, seem to have become somewhat more cautious, partly due to stricter regulations and falling returns in the rental market.

Conclusion: cooling down? Not for now

Whereas many people in 2022 and 2023 hoped for a structural cooling, everything indicates that the housing market in 2025 is once again under high pressure. Perhaps a rising interest rate will make prices fall slightly. But affordability per month will stay roughly the same. Cyclical patterns provide temporary breathing room in the winter months, but spring promises busyness and rising prices again. For buyers, this means acting strategically remains essential, while sellers can continue to benefit from strong demand. So to the question ‘Is the housing market really cooling down?’: I don't think so, not for now. Demand remains high.

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Is the housing market really cooling down?

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