In the news you read that prices are falling. But if you try to schedule a viewing in Utrecht, it's almost as busy as in the old days. Sometimes there's a sealed-bid round. Lots of houses are selling above the asking price again. What is going on? What should you offer? Do you still know?
Contents
- The housing market in Utrecht
- Interest rates are rising, and so are prices
- Jubelton
- Potential buyers
- Price rises in recent years
- Conclusion
The housing market in Utrecht
At the moment there are 21,005 serious searchers in the city of Utrecht. There are 1,429 homes on the market. That includes homes under offer and the new-build supply. Existing homes that are still genuinely available: that's only 516 homes in Utrecht. It's moving fast. Wittevrouwen is the most popular neighbourhood, and the interest rate is hovering around 4.8% for a 10-year fixed rate at 100% loan-to-value. This has been the case for around 4 months. The price category between €375,000 and €500,000 is the busiest. People preferably want 75 m2 or more and preferably more than 4 bedrooms. Around 6,000 people are looking for a home like that in Utrecht. Of whom 5,000 actually want a house. There are 48 of these houses available that meet these criteria. So you can imagine it's a real scramble.
But what do these figures say compared with the figures from two months ago? Back then we could bid below the asking price and schedule an appointment very flexibly. Two months ago we had the same interest rate. With 19,487 searchers, we had 1,518 fewer searchers. Housing supply was roughly the same, and so was the interest rate. But we see in the price comparison tool that prices in the city of Utrecht have risen by 0.7% to 1.1% compared with March. The latest figures haven't been processed yet, but we see that houses with a garden, at least two bedrooms and solar panels or good insulation have risen by between 5 and 10%. This has happened in the past month. You won't see these figures in the news yet, because that usually lags a bit behind. Figures in the Kadaster (the Land Registry) are on average between 3 and 6 months old, and the figures from NVM Brainbay are usually a few weeks old.
Interest rates are rising, and so are prices
But with rising interest rates, you'd think the whole housing market would collapse, surely? Last month's prices were comparable to the prices of January 2021. Prices for houses with a garden, at least two bedrooms and a characterful look are at the price level of April 2022. In April 2022 the mortgage rate averaged 2.4% for 10 years fixed, 100%. The gross monthly amount for a €400,000 mortgage was then €1,536 a month. At the moment the mortgage rate averages 4.8% for 10 years fixed, 100%. That means that for a €400,000 mortgage you now pay €2,099 gross a month. Of course, you pay off capital and still get mortgage interest back. But you pay off less and pay more in interest. So gross monthly costs have gone up by 36%. Doesn't it sound super illogical, then, that prices are rising now, while monthly costs have also gone up? People are overbidding en masse again. How is that possible? And isn't it a temporary revival? And what about inflation? What role does that play?
Source: CBS inflation
Source: CBS wage growth
Wage growth & inflation
We had enormous inflation. Life kept getting more expensive, interest rates rose sharply and everything got pricier. Every week I'm amazed by the groceries all over again. I really feel like an old moaner then. Or when I order a drink on a terrace, I automatically think: I remember when a Spa Rood (sparkling water) cost €1.60. That's when you know you're getting old. Inflation is still 6.4% this month. Wages rose by 5.4% last year. So things have become more expensive. But more salary also means more can be borrowed. Say you earned €50,000 a year. Then around this time last year you could get a €208,572 mortgage. If you took out a mortgage with NHG (the National Mortgage Guarantee) at 4.2% interest. This year, with the 5.4% rise, you can get €220,025. That makes it possible to bid just a bit more. Exactly the rise in your income. But also exactly the rise we're seeing now. Last quarter the rise in CAO wages (pay under collective labour agreements) was the highest, and it looks as if we're seeing that reflected in the rise of the market in Utrecht. Of course, we're not only dealing with CAO wages. But I also hear friends say: yes, inflation is high. Demand for new employees is high. I want at least inflation on top, plus the ‘normal’ pay rise. It's precisely these pay rises that are driving price rises in the housing market.
Jubelton
We also see that lots of young people still want to buy a house now. They still want to use the jubelton (a one-off tax-free gift towards buying a home). The government keeps changing the rules mid-game. That's why people would like to use the jubelton before the end of the year. Suppose that in September they say you do have to use the jubelton before the end of the year? Then I think there'll be a real rush.
Potential buyers
If you look at the potential buyers in Utrecht, you'll see that they're mostly people who are well off and highly educated. These are people who generally stand up for themselves well and have jobs that pay well. We see that our clients have plenty of opportunities to progress and, after waiting a while, really do want to take the next step. Interest rates have been stable for a while, and prices turned out not to be falling that hard after all. Lots of people put their buying plans on ice for a while. But now that the fall turned out to be less severe than expected, new-build is unaffordable with long waiting times, and Hugo's plans mean no rental homes are being added, everyone can see that we have a really big problem.
Price rises in recent years
In recent years, prices in Utrecht rose by 17% on average. Monthly costs have risen by around 36.5% in a year. Prices fell by 16.5% last year. That means that prices have effectively risen by 19% per year. I understand this is a bit simplistic. We're not taking repayments, mortgage interest relief and any surplus value or own funds into account here. But actually, with this, the price rise has continued in line with expectations. Last year we had to deal with rising interest rates, the opkoopbescherming (rules that stop investors buying up cheaper homes to let them out), enormous inflation and the war in Ukraine. Uncertain factors, and a large group of buyers dropped out. But at the same time our city is growing, and not just our city. We're getting more and more people in the Netherlands. On 1 January 2022, Utrecht had 361,742 inhabitants. We expect Utrecht to have more than 400,000 inhabitants for the first time in 2028. With the growth in the number of inhabitants, population density in the city is also increasing sharply. In eighteen years, Utrecht's population density will grow from 3,650 to 4,750 inhabitants per km². That's an increase of 1,100 inhabitants per km². Only not enough is being built.
Conclusion
I fear prices will keep rising. At the start of 2023 I wrote a blog: ‘The housing market in 2023: what will it bring us?’. My conclusion was that I thought people wanted to make plans again and take steps forward. But also that more balance was coming. And we really did see that in the first few months. For apartments that are a bit smaller or have little or no outdoor space, we also see 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. In my 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!’
I'm glad I advised people last year to go for it and buy a house despite the falling market. I still believe our population is growing too fast compared with our housebuilding. It also makes me very sad. Where are you supposed to live in the city as a single person? You can't rent anymore, but buying is impossible too. Where do you go if your relationship ends and you have little kids? I really don't know at the moment. Right now, you can live in the city if you have a very fat salary, rich parents, got in early, or have been registered long enough for a social rental home. This problem is only going to get bigger.
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