For the time being, most analysts still ‘just’ assume price increases in the housing market, albeit less sharply. Nevertheless, the Central Planning Bureau does not rule out the possibility that house prices may fall, in their latest report on the financial stability of our country.
Tipping points in price trends are difficult to predict CPB† But in the past, house prices also fell as a result of economic crises. Rising mortgage interest rates in particular can cause the housing market to tilt, according to the planning bureau.
But what is the probability that house prices will fall? We list a number of factors that play a role.
–
–
1. Mortgage interest rates ‘peak’
In the first four months of this year, mortgage interest rates rose sharply, in some cases even doubling. Overall, this is an increase of about 2 percent.
The amount of the mortgage interest partly determines how much money you can borrow from a bank or mortgage lender for the purchase of a house. The higher the interest rate, the less you can borrow. A higher interest rate therefore puts a brake on the rise in house prices, because buyers simply have less money to spend.
That confirms figures from real estate associations NVM† The brokers signaled a slight decline in house prices in the first quarter of this year, compared to the last three months of 2021.
In the video below we explain who is actually most affected by the rising mortgage interest:
–
–
But according to mortgage advisers The Mortgageer, Mortgage shop and the economic bureau of ABN Amro this rapid rise in mortgage rates has already come to an end. At most, interest rates will rise slightly for the rest of the year, limiting further price damping.
2. The supply increases a bit…
Also important for determining the price of a house is the market of supply and demand. How many houses are for sale? And how many potential buyers are there? In recent years there were very few houses and very many buyers.
This has to do with the housing shortage, which is estimated at around 300,000. The intention is that many additional buildings will be built in the coming years, but the number of building permits issued has actually decreased at the beginning of this year. The shortage will therefore remain for a while in the coming years.
It’s about new construction. Something interesting happens in existing buildings. At the last NVM figures the real estate agents noticed that a striking number of homes were put up for sale in the last weeks of March. Compared to the previous quarter, this was an increase of 10 percent in terms of supply.
–
–
The well-known housing site Funda also notices that the so-called ‘sale intention’ is on the rise, the company informs RTL Z. The Funda Index, which looks ahead to developments in the housing market, shows that more people are considering putting their house up for sale.
3. …while the interest seems to be waning
Makelaarsland, the largest digital broker in the country, has in turn noticed that the number of viewings is falling. A consequence of the aforementioned rising interest rates, high inflation and general economic uncertainty, says director Gijs van Wijgerden.
“Sometimes people book a viewing, but even cancel it,” he says. In theory, if supply and demand decreases, prices can fall.
–
–
However, you should not overestimate this effect. The number of viewings may decrease, but only one buyer is needed. It can lead to the overbidding, sometimes tens of thousands of euros above the asking price, becoming less intense. “It is healthier for the market and actually for everyone,” says Van Wijgerden.
4. More bankruptcies: the run-up to a recession?
The big question is what the aftermath of the corona crisis, high inflation and the war in Ukraine will mean for our economy. Will there be an economic recession, a period of contraction?
For example, high inflation reduces purchasing power, which means that people have less to spend. To their livelihood, but also to houses. After the end of the corona support packages, companies are confronted with debts that must be paid off. If they can’t do that, they will go bankrupt. And as a result, employees end up on the street.
The number of bankruptcies is indeed expected to increase in the coming months, says credit insurer Allianz Trade. This year by almost a quarter, next year by another 40 percent.
–
–
5. But, does that also cause unemployment?
Whoever loses his income will not want to buy a more expensive house quickly. He or she may even have to sell if the mortgage payments are too high. If that scenario becomes reality, the following applies again: more supply, less demand, so lower prices.
The question is whether that scenario currently holds. “Given the tightness on the labor market, it hardly seems to me to be a problem for people who lose their job in this way to find something else,” chief economist Peter Hein van Mulligen told RTL Z.
At the moment unemployment is not a problem, but a shortage of personnel. The sad thing is that those bankruptcies of their weaker brothers are very welcome for healthy companies. That way they can find hands again.
So whether any compulsory redundancies will soon lead to falling house prices is uncertain. Because, if people quickly find other work, there is little loss of income. Workers can then continue to pay off their mortgage. And if you earn enough, you can try to fulfill your move.
–
–
Okay, now what?
Are you looking for a home and wondering if you should wait? Only you can answer that question yourself. Not all signals are green, but they are not all red either.
The most important question is how long you would like to live in your new owner-occupied home and whether you are buying with someone you will be with for decades to come. Is the answer to both ‘long enough’? Then you can continue your search. You may find it easier now.
–
–
