What is happening in the Dutch housing market?
Expat Mortgages are experienced independent mortgage advisors located in Amsterdam, Haarlem, Rotterdam, Utrecht and The Hague, specialising in helping expats navigate home buying in the Netherlands.
After years of crisis, the Dutch housing market is finally on the up and has been since 2015. In comparison to other countries, it took some time for it to pick up again.
The combination of falling house prices after 2008, over-crediting (getting a higher mortgage than the house was worth) and an extremely large amount of repayment-free and investment-based mortgages in the market share are partly responsible for this delay.
However, the increase has indeed begun. In many places, especially the big cities such as Amsterdam, The Hague, Utrecht or Haarlem, the house prices are already above the levels they reached during the peak period of 2008.
This can mostly be credited to the renewed confidence in the economy, and in particular the continued low mortgage interest rates. For those looking to sell their house, this is definitely good news. Currently, you can sell your house with ease if it's situated in a sought-after location.
What does this development mean for buyers?
The group of potential buyers is large. Many people choose to buy a house instead of renting one. Especially considering the low mortgage interest rate that you can put into place for a fixed period.
Most people selling their house do this via a professional, such as an estate agent. A few people try to sell their house themselves or use an internet service to do so (Makelaarsland or Zelfverkopen). The grey housing market (properties not listed on Funda/properties being sold before hitting the official market) seems to have dried up, as investors, who are often involved in these sales, are aware of the power of Funda. The more potential buyers you have, the higher the price.
It is not only the price, which is being driven up; pressure is also being put on the buying conditions. In popular regions, it has become the rule as opposed to the exception that properties are sold above the asking price.
Consideration & grace period
When buying a house in the Netherlands, you usually get the following:
- A three-day legal consideration period.
- A grace period of 4 to 6 weeks to get your finances in order.
Three-day consideration period
The three-day consideration period cannot be negotiated upon and is valid when signing the preliminary purchase agreement. If you sign the purchase agreement on Wednesday, you have until Monday end of close to either back out or go through with your purchase.
Financial grace period
The financial grace period is not mandatory; however, it is a standard clause in every purchase agreement, and applies to the period of time that the seller gives to the buyer to sort out their financials for the purchase of the property. This is often a period of 4 to 6 weeks.
Of course, this last clause leads to some uncertainty for the seller. If the buyer does not manage to secure financing to buy the property then the seller will have to begin the process of selling their house all over again after the 6 weeks have passed.
Buying a house without a mortgage
A publication by the FD in May 2017 revealed that 24 percent of houses in Amsterdam are bought “without a mortgage”. Houses were bought, not only by internationals (Chinese, Russians and Israelis), but also by parents who bought a property using their savings for their children going off to study.
These buyers hold strong positions in the buying process, as they do not require the time to sort out their financials. The seller thus, after the obligatory 3-day consideration period, has a guarantee regarding the sale of their house - a nice feeling for the seller.
Competing with “cash buyers"
To be able to compete as a potential buyer with “cash buyers”, many purchasing brokers (who are almost mandatory in Amsterdam) advise their buyers to drop the financial grace period clause. This increases the likelihood of a transaction considerably, something that is undoubtedly good for the seller.
The position of the buyer
But what about the position of the buyer; one who has just paid 15 percent more than the already high asking price? The preliminary purchase agreement is often signed within one or two days (luckily by an independent solicitor in Amsterdam), and then the buyer has to arrange their mortgage.
Registration at the BKR
Does the buyer have a “clean sheet” at the BKR? The Office for Credit Registration (BKR) keeps track of all payment arrears for residents in the Netherlands. Late payments (of 3 months) almost always lead to your request for a mortgage being rejected.
If the buyer is from Italy, Germany, Belgium or Austria, or has lived in the Netherlands for a long time, a credit-check will be carried out in their origin country.
What about the property?
The mandatory purchasing broker (often between 1 to 2 percent commission) has just advised the buyer to bid 15 percent above the asking price and to drop the financial grace period, but is the property worth the money? What does it say on the independent valuation report? What state is it in structurally? Have service costs, leasehold, asbestos, the area development plan and VVE (Association of owners) been taken into account?
The buyer’s financial situation
Lastly, what is the financial situation of the buyer like? Nowadays, investing your own money when buying a house is mandatory. The maximum mortgage was 101 percent of the market value in 2017. Does the buyer have a permanent contract at work for an indefinite period and do they have a sufficient income, or does the current situation deviate from the norm? When it comes to entrepreneurs and freelancers (ZZP-ers) and those with a temporary contract or a fluctuating income, banks are not as lenient as they used to be.
Still want to compete with “cash buyers"?
Some general advice to take into account:
- Don’t buy without a cancellation clause. If you are still “forced” to buy without a cancellation clause, you need to make sure you are fully prepared for all outcomes.
- Build up a good mortgage portfolio.
- Make an appointment with your bank or mortgage advisor.
- Do your own credit check online or at your bank.
- Check Schufa (Germany & Austria) and CRIF (Italy).
- Have the purchasing broker/estate agent, who is advising you to bid above the asking price and drop the financial grace period, guarantee that the property is 100 percent up to technical standards.
Trying to compete with “cash” buyers this way remains risky, and as independent mortgage advisors, we definitely do not encourage it.