Is it a good time to buy? The 2015 Dutch housing market
Expat Mortgages are respected independent mortgage advisors in Amsterdam, Haarlem and The Hague specialised in helping expats navigate homebuying in the Netherlands.
The Dutch property market has experienced a bumpy ride over the past eight years, from the peak of the property bubble in 2008 to the stagnation of the 2013 housing slump.
Now, in 2015, the market suddenly has its mojo back. With interest rates down and sales numbers climbing, house prices are starting to jump again.
So what’s going on? How did this sudden rebound happen? Is it a repeat of the 2008 bubble and what does this potential bubble mean for buyers (and sellers)? And is it only occurring in Amsterdam, or also in other surrounding areas?
Here we take a look at the current Dutch housing market.
A brief history of the housing market
To understand the current housing situation in the Netherlands, it helps to look back at market behaviour over the last few decades and, in particular, the behaviour of doorstromers.
Doorstromers are buyers and sellers who keep the Dutch property system moving as they literally "flow through" the market because their (change in) lifestyle demands it.
From buying a larger house to fit their growing kids, to selling the family home on retirement to move into a smaller and more central apartment, doorstromers’ need for change drives the momentum of the market - through the good times and the bad.
A change in habit
Until 1990 homeowners (or doorstromers) would first sell their old house before buying a new one as they would need to know their budget before purchasing a new property. Then, from 1990 until 2008, due to steadily increasing house prices, it worked the other way around: people would buy a new home before selling the old one.
However, in 2008 the financial crisis hit, the property bubble burst and the pattern switched back to the pre-1990s model where you first needed to sell your old property before buying a new one.
As sellers waited longer to get their desired selling price (which was often too high due to the crisis) they also delayed buying their next property - causing the entire market to slow down.
Lower housing/property prices during the crisis
Between 2008 and 2013, house prices in the Netherlands dropped more than 20 per cent. Over this period the Dutch government tried to kickstart the market multiple times via a variety of stimulants including tax breaks and lower interest rates.
Drastic measures in 2013 and 2014
In 2013 and 2014 the Dutch government introduced new mortgage rules to safeguard homebuyers against running into excessive debt while simultaneously trying to stimulate the market.
Some of the initiatives included:
› Reduction of the transfer tax from 6 per cent of the buying price to 2 per cent (still current in 2015).
› A temporary parental gift tax exemption on amounts up 100.000 euros which lasted from October 2013 to the end of 2014.
› Reducing the maximum mortgage value to 104 per cent in 2014 (and 103 per cent in 2015).
› Since the start of 2013 only annuities and linear mortgage models are eligible for the interest tax deduction.
Additionally, the European Central Bank cut interest rates to record low levels, which has also helped boost buyer activity.
Dutch house prices bounce back
In summer 2013, Dutch house prices started to stabilise, and in mid-2014 prices finally started to rise again.
Since the beginning of 2015, especially in Amsterdam, prices have returned to 2008 levels and may even start to exceed them. Houses are now selling for more than the asking price - sometimes up to 10 per cent more.
Currently new houses on the market see many potential buyers scheduling appointments and showing up for property inspections and, if a property is popular, then sales negotiations move fast.
Deals can be sealed within a day or two, and buyers without a real estate (or buying) agent often miss the opportunity to own their desired house as they are not in a strong position to negotiate.
Huge demand for property
There is now a huge demand for residential property - mostly sparked by the record-low mortage interest rates which can be as little as 1,9 per cent - with inner-city residences the most in demand.
Anything inside Amsterdam’s ring road, for example, or with a balcony or garden, is keenly sought after.
However this demand is not the same throughout the whole country. It is important to note that some regions, like Noord and Zuid Holland, are experiencing more of a rise than in others, such as Groningen, Friesland, Limburg and Zeeland.
A recent example of buyer interest
One example of the current demand in Amsterdam is a house in Grensstraat (Amsterdam Oost) which recently went on the market with an asking price of 600.000 euros.
Within the first week this property received more than 100 requests for a viewing appointment - a number that would have been unheard of 12 or more months ago.
Such a large number of inquiries is an indicator of the current high demand for such properties - which looks likely to continue.
From buyer’s to seller’s market
Naturally the increased demand has an impact on the property system, which is why, in March and April of this year an unusual and interesting change occurred. During these two months, literally overnight, the Dutch housing market switched from a buyer’s market (kopersmarkt) to a seller’s market (verkopersmarkt).
A seller’s market means that the conditions are more favourable for vendors as demand pushes prices up. Sellers often postpone the selling of their properties waiting for prices to rise further - which restrains supply and increases demand even more.
Houses are now selling for amounts above their asking prices and settlement conditions are often worse for the buyer.
Is it a good time to buy a house?
So, with all the knowledge of the recent changes in the Dutch housing market, and the ongoing transition that it is experiencing... is it still a good time to buy a property in the Netherlands?
The answer, in my opinion, is yes. It is still a good moment to buy a home in the Netherlands as interest rates are extremely low; the interest on annuities and linear mortgages is still tax deductible and mortgage repayments can be considerably lower than rental prices.
However, house prices continue to rise, new or nice houses are scarce and not all Dutch cities and regions are experiencing the same property boom. So homebuyers still need to take care not to exceed their budget or to invest in an unreliable property.
Good preparation is essential
If you want to buy a property in the Netherlands in 2015 then you will need to be well prepared with a solid mortgage plan, reliable financial advice, good negotiating skills (or a buyer's agent) and a clear idea of what you are looking for.
Once you have organised all these elements then you will be able to act swiftly when you find a suitable property and hopefully you can secure your dream home.