In the year and a half that they are looking, Lisette Brattinga (52) and her husband got used to a situation in which houses worth more than a million euros were sold as if they were currant buns. “We were standing in a living room with twenty people, we were allowed to look around for fifteen minutes and we had to make an offer quickly. You just had nothing to say as a buyer.” Three times they made offers, without reservation of financing and tens of thousands of euros above the asking price. They never had a bite.
At the end of June, the situation changed. Suddenly, after a viewing, she was called by the broker: “The price has been reduced because of the foundation, don’t you want to make an offer?” “Huh, I thought, what do we get?” It has happened to her a few times since then.
The signals Brattinga describes are more people see in their environment. Houses that have been on the market for a long time. Buyers who can choose when to schedule a viewing. Advertisements that disappear from Funda and are put on again later, with a lower asking price. Sales that don’t go through because buyers can’t get their mortgage – which means that the sale has been concluded subject to financing, something that was still exceptional six months ago.
The quarterly figures presented by the NVM estate agency on Thursday leave no room for doubt: the market has changed. House prices fell on average 5.8 percent in the past quarter compared to the previous quarter: the largest quarterly decline ever recorded. On an annual basis, there was still an increase of 2 percent, but that is a lot less than the 20 percent that was usual in recent years. High mortgage rates, an energy crisis and record inflation led to the turnaround in the housing market that some – especially first-time buyers – have eagerly anticipated in recent years. Putin’s foray into Ukraine accomplished what the coronavirus pandemic failed to do.
“This is a really big bang,” says Jasper du Pont, owner of Twitter account @Home news, on which he uses data to research the housing market. “By comparison: at the lowest point of the crisis in 2013, house prices fell almost 10 percent on an annual basis, according to the Land Registry. So if this kind of decline lasts for three more quarters, we’re really going to have a crash.”
Not that buying a home is suddenly easy. Mortgage interest is at its highest level since 2014, according to Van Bruggen Adviesgroep this week. For a house above 355,000 euros, the interest is on average 4.68 percent, if you fix it for twenty years. Monthly payments are therefore considerably higher, while buyers can borrow less. Nibud recommends further tightening the lending standards for next year.
More expensive segment
In recent months, the figures have already seen a turnaround. The number of homes for sale rose rapidly, as did the median asking price. Du Pont thinks the latter is due to the fact that homes in the more expensive segment in particular sell less quickly.
This can also be deduced from the NVM figures. The square meter price fell last quarter by 5 percent compared to the previous quarter, to an average of 3,872 euros. That is significant, but a smaller decrease than that of the average selling price. “That confirms that part of the price drop is probably due to the fact that smaller, cheaper homes are mainly being sold,” says Du Pont.
Also read: Another sign that the boom is over: house price rises are leveling off further
Figures from mortgage lenders and the Land Registry show that young people in particular are more likely to buy a house. “They have no other choice: they have a child or move in together. They have to move on with their lives,” says Du Pont. “Young people are more likely to intervene, but less wealthy elderly people do not move on, and more expensive houses remain.”
But eventually there will also be a turning point, he thinks. “If you ask me to look into a crystal ball, I expect that the pressure on prices is greatest at the top of the market. And that automatically drops to the lower segment. At a certain point, the starter also thinks: if I wait another year, I can get something bigger for those three tons. Then the market will also collapse.”
Young people are coming in more often, but less wealthy elderly people do not flow through, and more expensive houses remain
Step back
A turnaround in the market has been expected for some time, since interest rates started to rise. The invasion of Ukraine exacerbated economic uncertainty. Nevertheless, the NVM’s figures on the owner-occupied housing market in the second quarter of this year were still diffuse: there were fewer overbids and more houses for sale, but prices still rose – albeit less than in recent years. Du Pont: “If everyone who already has a house takes a step back, the people who first made a mistake will suddenly intervene. That means it takes a while before everyone realizes that the market is changing.”
Also read: Mortgage interest is rising: first-time buyers are doubly screwed
Falling house prices are usually good news for first-time buyers, but people who have just bought a house and have to move out – for example because of a divorce – can get into financial trouble. House prices also affect the economy as a whole, as homeowners consume more when their home has increased in value – and vice versa.
Lisette Brattinga and her husband have already sold their previous owner-occupied house and are temporarily living in a rented house; they are therefore not so bothered by the higher mortgage interest rate. They are looking for a house on the water, in the triangle Rotterdam-Vechtstreek-Utrecht. Not too big, because the kids are already out of the house, and not too small either. A ‘needle in a haystack’, according to Brattinga. But the supply is increasing: “At the beginning of the year we saw 400 houses for sale on Funda, now more than a thousand,” she says. “It would be great if our dream home could now be reached.”
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