House prices fall faster for first-time buyers than for those moving up

First-time buyers who entered the housing market in the big cities benefited the most from falling house prices in the second quarter of this year, reports newspaper De Volkskrant, based on the quarterly report of the Land Registry. First-time buyers who bought a home in Amsterdam, Utrecht, Rotterdam or The Hague paid an average of 8.3% less than a year ago.

It all happens because first-time buyers got a larger share of home purchases in the first half of this year, despite the rise in mortgage interest. At the same time, they spent less money per purchase. The data comes from research by the Dutch Association of Estate Agents (NVM) and data subsidiary Brainbay.

According to the numbers, 45% of buyers are starters in the house market. Previously, this was approximately 40%. In the second quarter of 2023, 15,300 first-time buyers bought their first home, 400 more than in the same period last year. ‘We see that the financial situation of first-time buyers has generally improved in 2023, despite the rise in mortgage interest rates. The main reasons for this are relaxed borrowing rules, the sharp rise in incomes and the fall in house prices,’ says NVM Living Department director Lana Gerssen.

Historically, the seller ruled the housing market in big cities. Almost every house was sold fast, often for an amount higher than the asking price. Now that values are falling and there are more houses for sale, it’s the buyer’s turn to command. The number of houses on the market has not been this high in many years. On the Funda listing website, homeseekers can now choose from over 113,000 houses. Eighteen months ago there were fewer than 75,000 homes available. Only 39% of houses are currently selling for more than the original price, according to figures from NVM. A year ago, 82% of transactions were outbid to a higher amount.

At the peak of the owner-occupied housing market in 2022, a first-time buyer paid an average of €369,000 for a home. At the lowest point in the first quarter of 2023, this was €329,000. The majority of homeseekers surveyed by Funda expect prices to fall further or to remain about the same in the near future. A premonition that is echoed by ING’s economists: the bank predicts that the average selling price will be 6% lower this year. The hope that prices will fall even further is reason enough for many first-time buyers to wait a bit before purchasing a home. More than half of all starters surveyed by Funda indicate that they are not buying immediately because they think they will have to pay less for a home in a few months.

Average surface area of purchased homes is declining
Only a minority of starters buy an apartment (29%) or a house smaller than 75 m² (18%). ‘This goes against the stereotype that a starter home is a small apartment,’ Gerssen notes. However, the average surface area of homes purchased by first-time buyers is declining. For apartments this is now on average 73 m² and for residential houses 114 m². First-time buyers have bought smaller homes in recent years because of the sharp rise in prices.

Younger buyers
Older tenants make the transition from the rental to owner-occupied sector less often. As a result, the average age of first-time buyers is declining. The average age of single starters was 36 in 2019; in 2023 this will be 34 years. For couples, the average age of the youngest partner has decreased from 34 to 31 years.

The NVM has calculated that first-time buyers must have wealthy parents or a good income to buy a house. Single starters with an average salary (€38,000) can only finance 3% of the currently available homes, since their borrowing capacity is just €159,000. Couples with twice the average salary can only afford 37% of available homes.

Written by Raphael Perachi Vieira