The housing market in the Netherlands is bursting with conflicting signals at the moment. If you believe Hugo de Jonge, there's no such thing as an uitpondgolf (a wave of landlords selling off their rental homes). But we see something different. The last blog we wrote was liked en masse on LinkedIn and we got lots of reactions to it. We bought a home in Spain, and the clients we had previously at Suc6Invest couldn't message Gé fast enough. Their homes were about to become vacant, so they could sell, and they're interested in an apartment or little house in Spain to let out. We see desperate tenants when we take photos of their lovely rental home that's going on Funda. Landlords and we would rather see it differently. But the new regulations practically force landlords into it. We estate agents can definitely see that a lot of rental homes are being sold off. Hugo de Jonge likes to see what he himself proclaims; he even has articles written in which investors say they think the plans are great. I find that very hard to believe… What does this phenomenon mean for the housing market, and especially for first-time buyers? Let's zoom in on these developments.
Cause – a sell-off wave among small investors
According to De Jonge, the number of sell-offs is falling in the run-up to the Affordable Rent Act (Wet betaalbare huur). However, investors and estate agents strongly doubt this. We really see it differently in the market. Small Box 3 investors in particular see letting their homes becoming unprofitable because of the planned rent regulation. Small homes that can't be moved into the free (liberalised) rental sector are mostly sold on the buying market as soon as the tenant changes. This phenomenon is known as the uitpondgolf, in which investors sell their homes as soon as they become vacant.
Consequence – supply on the buyers' market increases
The effect of this sell-off wave is noticeable on the rental market, where supply is shrinking. Rents in the free sector are rising enormously while supply is falling. In 2023 a home in Utrecht was let within 17 days on average, at an average rent of €1,595 a month. In 2022 this averaged €1,400 a month. In 2022, 1,362 homes were let in Utrecht via Funda. In 2023 there were only 1,177. The average rent in the first 2 months of 2024 is now €1,650. Quite a considerable rise. At the same time, supply at the lower end of the buying market is actually increasing. Accounts from investors and estate agents, backed up by figures from rental platform Pararius and the Kadaster, point to a shift of homes from small Box 3 investors to first-time buyers. Small investors with a portfolio of three to ten homes sold around 4,600 homes to first-time buyers last year, an increase compared with 2022. We've also seen supply on Funda increase over the past few weeks. Every week there really are more homes on offer. This week there were another 15 more homes. The number of house hunters is falling. But at the same time the pressure is rising. Many of the homes investors are now selling off aren't exactly the homes first-time buyers instantly fall in love with. In fact, we see the pressure on homes with more bedrooms and good outdoor space, which are now selling disproportionately well.
Consequence – first-time buyers forced to buy
The picture seems more complex, however. Although De Jonge hopes expensive private rental homes will become affordable owner-occupied homes for first-time buyers, real-life stories show otherwise. Nice that more supply is coming. But not everyone wants to buy. We now see first-time buyers taking on a hefty mortgage together straight away. They can't rent first. The market is rising fast, you throw a lot of money away and you hardly stand a chance of getting a rental home. I tried to get in for someone I know. Within half an hour there were already 200 responses to a 50 m2 home with a basic rent (excluding service charges) of €1,395. We went to view a ground-floor flat on the Abel Tasmanstraat. Really great, with a big garden. In the end the home sold for more than €450,000. There was a damp patch visible, so we rang the neighbour's doorbell to see what was on her side at the level of the damp patch. She was kind enough to open the door. She said she found the rent so high, and that it felt a bit unfair to pay so much rent. I carefully asked how much rent she paid. It was €1,250 a month. Someone who buys this home now and has a mortgage of €450,000 at 4.36% interest pays €2,243 a month gross. I can hear you thinking, yes, but they're also paying off the loan and get something back from mortgage interest deduction. That's true. You pay off €620 a month. Your net monthly cost is €1,593. But you also have to pay for your own maintenance. By the way, you'd also need a salary on your own of €94,500 gross a year for this. For the rental home, the requirement is €45,000. So the lady renting the home could never buy it. If you want to buy a house on a salary of €45,000, you can get a mortgage of €200,000. In Utrecht that buys you a home of approx. 25 m2 with no outdoor space. The home she rented was approx. 65 m2 with a garden. The monthly costs for her mortgage would then be €960 gross a month and €694 net. That's a bit twisted, isn't it?
Consequence – an overheated bidding war on the buying market
The growing supply at the lower end of the buyers' market has not, however, led to more affordable homes for first-time buyers. Asking prices in Utrecht have risen, but the overbidding is even more shocking. Last year I wrote a blog about overbidding; I'll update it soon for 2024. The overbidding strategy is especially visible in the lower and middle segments, which is where Box 3 homes end up. In 2024 the average price paid for a home in Utrecht was €475,000. On average, bids were 6.9% above the asking price. With a buying agent, the average overbid was 10.8%. The three buying agents who did the most purchases in Utrecht even bid an average of 15% above the asking price. The average price of a home bought with a buying agent was €520,000. Does this mean it's more expensive to buy with a buying agent? Erm, maybe with some who mainly want to close a deal. Most buying agents actually make sure you don't buy a pig in a poke. In fact, we see that the very nicest and most popular homes are often bought with a buying agent. No less than 53% of homes in Utrecht are bought with a buying agent. It's precisely with the nicest houses that the help of a buying agent comes in handy. For those houses, you often have to pay more.
Conclusion – the sell-off wave and the struggle of first-time buyers
The sell-off wave among small investors has led to a shift on the housing market, with supply on the buying market increasing, especially for first-time buyers. However, this doesn't automatically mean more affordable homes for this group. The overheated bidding war and high asking prices actually make it harder for first-time buyers to secure a home. While the government hopes for a favourable effect from the sell-offs, first-time buyers seem to be the ones losing out from this shift. Last year we saw many homes hovering around €440,000. That was the limit for the first-time buyers' exemption from transfer tax. In September we saw this shift to €510,000. But we now see that this limit isn't even decisive any more. People are getting desperate. It's a challenge for policymakers to strike a balance between stimulating the buying market and guaranteeing affordable housing for first-time buyers. The upcoming evaluation of transfer tax could possibly help create a more favourable investment climate and find a balanced solution to the problems on the housing market. But would it work? It's a huge pile-up of measures, and interest rates have risen. Hasn't the money already crossed the border, and hasn't trust in the government fallen so far that the problem is irreversible? I hope not.
