At the end of last year, the Netherlands had 142,900 houses worth more than 1 million euros. That is 69 percent more than a year earlier, while the number of millions of homes had already risen by 40 percent the year before, according to a report. annual report from Calcasa.
The fact that the 1 million mark is passed so much more often has everything to do with the house price increase of about 20 percent in the year 2021. “The image that these are mainly detached villas with thatched roofs is no longer correct,” says Tijs. Pelemans of Calcasa. “In Amsterdam or Bloemendaal, a large number of terraced houses are already above that sales price when they go on sale.”
Calcasa is a leading technology company that values automated real estate through statistical analysis. Almost all mortgage lenders use the company’s valuations in some cases. To prevent outliers from setting the price, they work with 25 reference homes that have been sold, explains Pellemans.
Housing market sensitive to economic fluctuations
There are now ten times as many million-dollar homes as in 2013, when the bottom prices were reached after the credit crisis. Since 2013, house prices have almost doubled on average. House prices have fallen again in the past quarter, thanks to the rise in mortgage rates and financial uncertainty associated with inflation. It shows that the Dutch housing market is sensitive to economic developments.
There is a relatively small group of people who can pay the money when such a house is for sale. This means that the value can also fall quickly if the economy is down
You can also ask yourself whether the residents of the 142,900 houses (3 percent of the owner-occupied housing stock) can now call themselves millionaires. “It is of course a paper reality and this is certainly variable with expensive houses,” says Marcel Warnaar, housing market specialist at the National Institute for Budget Information (Nibud). “There is a relatively small group of people who can pay the money when such a house is for sale. This means that the value can also fall quickly if that group gets worse financially.”
“As long as you don’t move, you can’t buy anything for the increased value and other houses have also increased in value,” Warnaar continues. “These people do benefit if they live smaller and, of course, cheaper. In percentage terms, their wealth has grown by the same amount, but in hard euros that rises faster than for people in a cheaper house.”
Equity is often included
Incidentally, it is not the case that owners of multi-million dollar homes cannot do anything with the increased equity. “There is a large group of people who use the equity of highly valued houses to renovate or make their home more sustainable,” says Marga Lankreijer, mortgage expert at Independer. “With all mortgage lenders you can withdraw the equity to, for example, insulate your house, but you can also spend that money as a gift to the children, the acquisition of a second home or the purchase of a camper. We also see the latter a lot. Monthly costs may go up, but certainly because interest rates were still very low last year, many people have taken extra money out of their homes.”
However, not every homeowner is happy about the increased value, Lankreijer estimates. “There are advantages and disadvantages of living in it.” If your house is worth more than 1,110,000 euros, a notional rental value of 5,550 euros plus 2.35 percent of the value of the house above that amount applies. You have to add those amounts to your income before the mortgage interest deduction, so you end up paying more tax.
“Then go and live smaller, many people would say,” continues the mortgage expert. ,,But especially seniors cannot move so easily. I would not say that they are in a golden cage, but with a modest pension and state pension you can no longer borrow that much money for a home and customization is required. You can only buy a smaller house with that money if you have a very large equity and therefore have not withdrawn too much. You have not just found a suitable home at the moment.”
The difference between the top and bottom of the market has drifted further and further apart in recent years. In 2013, a house worth 700,000 euros was still in the top 1 percent of the market. At that time, a house of 54,000 euros belonged to the cheapest 1 percent, a difference of 646,000 euros. A house of 1,385,000 euros now belongs to the 1 percent most expensive houses, while a value of 100,000 euros falls in the bottom 1 percent. The difference has therefore approximately doubled.
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