Imagine house-hunting and seeing a place that you like, and then demanding the walls be painted in your favorite colour, bathroom tiles changed, kitchen renewed, while offering 10% less than the asking price. That’s a seller’s nightmare and a buyer’s heaven. This scenario was common in Dutch cities where house prices were low, some ten years ago, and homeowners were stuck with mortgages that were purchased during the last real estate boom in the early 2000s. After the credit crisis of 2009, house prices had dropped under the market value and they could only be sold for less than what they had been purchased for.
Fast forward to now: a potential buyer goes house-hunting and sees a place he likes. If he wants the place, he offers €100,000 above the asking price, and considers himself lucky if the deal goes through. The current housing market in Amsterdam and other cities in the Netherlands is in a frenzy and a nightmare for buyers, especially for first-time buyers without any savings or financial help from parents. With a shortage of more than 285,000 affordable houses in the Netherlands, the housing situation is bleak, which is why on Sunday 12 September more than 15,000 protesters converged on Amsterdam’s Westerpark, waving banners “Desperately looking for some rich parents” and “Not even the lottery will help me”.
According to research agency ABF, the problem is not only the lack of supply of affordable housing, but also the changing demographics. In the next fourteen years, ABF not only expects the population to grow by more than 800,000 people, but also the composition of Dutch households to shift from more multiple-person households (parents and children) to single-person households. By 2035, 70% of Dutch households are expected to be single-person, which will only add to the existing shortage.
Although demonstrators hoped to put the lack of housing on the political agenda, it does not look like politics in The Hague can resolve the problem anytime soon. In the middle of the last economic crisis, in the 2010s, social housing corporations had too many empty homes on their books and were forced to sell them. But now, with interest rates at an all-time low and rising incomes, the role is reversed, and more people want to purchase a home than ever before. In many cities, there is a growing rift between haves (people who own their home) and have nots, who have to rent homes. In the Netherlands, homeowners are often partially reimbursed for their mortgage payments as a tax break, which makes the rift in buying power between homeowners and renters even greater.
The housing crisis is not only a Dutch, but also an international one. Large investment companies such as Blackstone are scooping up homes in major Dutch cities as investment properties. Some local municipalities have even chosen to forbid investment firms from purchasing homes, implementing laws that only allow city residents to purchase, but that will not structurally solve the problem.
Unfortunately, for the time being, national politics can change little. If there is going to be a fair housing market, it will have to have to come from banks by relaxing their strict requirements for acquiring a mortgage. Currently, a potential buyer can only get a mortgage for an amount that is five or six times their annual income. If John Doe earns €30,000 a year, then he is only eligible for mortgage of €180,000. In a city like Amsterdam, where most apartments are selling at €10,000 per square meter, he cannot get a mortgage for anything larger than a storage shed. Nevertheless, if he rents, his monthly rent will likely exceed what he would pay for his monthly mortgage.
However, banks are commercial enterprises too. In the early 2010s, many banks were on the verge of bankruptcy due to numerous repossessed properties that were worth less than the mortgage value and could not be sold for their initial price. For the moment, the most feasible option for potential buyers is to save some money and wait for the real estate market bubble to burst. In seven years, a lot can happen.
Written by Benjamin Roberts