Is the tipping point coming? ‘House prices may fall’

For the time being, most analysts still assume ‘just’ price increases in the housing market, albeit less sharp. Nevertheless, the central planning agency does not rule out the possibility that house prices may fall, in their latest report on the financial stability of our country.

“Turning points in price developments are difficult to predict,” writes CPB. But in the past, house prices also fell as a result of economic crises. According to the planning agency, rising mortgage rates in particular can cause the housing market to fluctuate.

But what is the probability that house prices will fall? We list a number of factors that come into play.

1. Mortgage interest rates ‘peak’

In the first four months of the year, mortgage rates rose sharply, in some cases even doubling. Overall, this is an increase of about 2 percent.

The size of the mortgage rate determines in part how much money you can borrow from a bank or mortgage lender to buy 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.

This is confirmed by figures from the real estate association NVM. 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 actually suffers the most from the rising mortgage rate:

But according to mortgage advisers De Hypotheker, Hypotheekshop and ABN Amro’s financial bureau, this rapid rise in mortgage rates is already over. Interest rates will rise slightly at most for the rest of the year, limiting further price moderation.

2. The supply increases a bit …

Also important in 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 is due to the housing shortage, which is estimated at around 300,000. It is intended that many additional buildings will be erected in the coming years, but the number of building permits issued has actually fallen at the beginning of this year. The shortage will therefore persist for some time in the coming years.

It’s about new construction. Something interesting is happening in existing buildings. With the latest NVM figures, real estate agents noted that a remarkable number of homes were put up for sale in the final weeks of March. Compared to the previous quarter, it was an increase of 10 percent measured by supply.

The well-known housing site Funda also notices that the so-called ‘sales intention’ is on the rise, the company informs RTL Z. The Funda index, which looks forward to developments in the housing market, shows that more people are considering putting their house up for sale.

3.… while interest appears to be declining

Makelaarsland, the country’s largest digital broker, has in turn noticed that the number of views is declining. A consequence of the aforementioned rising interest rates, high inflation and general economic uncertainty, says director Gijs van Wijgerden.

“Sometimes people book a screening, but even cancel it,” he says. In theory, if supply and demand fall, prices could fall.

However, you should not overestimate this effect. The number of impressions may decrease, but only one buyer is needed. This can lead to the overcrowding, sometimes tens of thousands of euros above the offer price, becoming less intense. “It’s healthier for the market and indeed for everyone,” says Van Wijgerden.

4. More bankruptcies: the prelude to a recession?

The big question is what the consequences 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?

High inflation, for example, reduces purchasing power, which means that people have less to spend. For their livelihood, but also for houses. Following the completion of the corona support packages, companies will be faced with debts to be paid off. If they do not, they will go bankrupt. And as a result, employees end up on the streets.

The number of bankruptcies is expected to increase in the coming months, says the credit insurance company Allianz Trade. This year by almost a quarter, next year by another 40 percent.

5. But does it also provide unemployment?

The one who loses his income will not quickly buy a more expensive house. He or she may even have to sell if the mortgage repayments are too high. If that scenario becomes a reality, the following will apply again: more supply, less demand, then lower prices.

The question is whether that scenario holds at the moment. – In light of the tight labor market situation, it seems to me that it is hardly a problem for people who lose their jobs in this way to find something else, says chief economist Peter Hein van Mulligen to RTL Z.

At present, unemployment is not a problem but a shortage of staff. The sad thing is that the bankruptcies of their weaker brothers are very welcome for healthy companies. That way, they can find hands again.

So whether any forced layoffs will soon lead to falling house prices is uncertain. Because if people quickly find other work, there is little income loss. Workers can then continue to pay off their mortgages. And if you earn enough, you can try to fulfill your move.

Okay, what now?

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 want 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 ‘far enough’? Then you can continue your search. You might find it easier now.

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