The corona crisis is leaving its mark in all aspects of the economy, including the housing market. Although the housing market is currently still “running at full speed”, according to Rabobank, a sharp decrease is expected soon.
As yet, there is no ‘corona effect’ on houses price and sales figures. Until July, houses were on average 7.1% more expensive than a year earlier. Also, nearly 7% more homes were sold than in the first six months of last year, according to Statistics Netherlands (CBS) and the Land Registry.
Viewings and bids provide the best indication of the mood in the housing market. According to Makelaarsland, the largest estate agent in the Netherlands, on average 18.4 viewings were requested per home in the second quarter of 2020, a rapid increase compared to the same quarter last year.
Demand for cheaper homes remains high
The different price ranges all show slight fluctuations in the number of viewings. With an average of 21.67 viewing requests per home, it is again the lowest price bracket (under € 150,000) that is the most sought after. Here the demand for housing remains incredibly high. The enormous demand for housing is also reflected in the number of houses that were sold above the asking price. In the second quarter of 2019, 48% of the houses were sold at or above the asking price; in the ‘corona quarter’, that percentage increased to 63%.
Loss of jobs will soon make an impact
The fact that the housing market is not yet hit hard by the corona crisis is due to the government support packages for companies. Until now, these have proven to be effective in counteracting a sharp rise in unemployment among potential home buyers. Businesses have been able to keep their staff on board, but this will not be the case for much longer. Ultimately, unemployment will rise, due to a growth in the number of reorganizations and bankruptcies, Rabobank warns. A total of 400,000 people will lose their jobs due to the corona crisis, De Nederlandsche Bank (DNB) expects.
Unemployment is forecast to rise to 7.3 percent in 2021, higher than it has been in years. Job loss, and the fear of losing one’s job, will dampen the demand for homes. Banks have also become increasingly strict in their mortgage requirements, fearing that buyers might lose their jobs. According to DNB, the average sale price of a house will increase by 4.3% this year compared to 2019, but prices will fall by 2.1 % in 2021, DNB says, and by 3.7% in 2022.
The expected lower prices are already causing fewer people to buy a house: those who buy now run the risk that their house will be ‘under water’ in a few years, meaning that the mortgage is higher than the value of the house. Thus, the buyer could end up with a substantial debt if he/she wants to sell the house again.
According to Rabobank, the number of home sales this year will already be 11 percent lower than in 2019, while ABN Amro forecasts that the number of transactions will fall by 5% this year and 10% next year. First-time buyers in particular are afraid of a drop in income and therefore do not buy. People who already own a house are also stuck: it is more difficult for them to sell their current home, and they will therefore rather stay where they are.
As a result, the number of sales will fall from about 220,000 this year to about 190,000 next year. Investing in buy-to-let apartments also has become less attractive due to the lack of tourists, expats and international students as a result of the corona crisis. The bank expects this to have an effect on the housing market, especially in student cities.
In February, Rabobank predicted house prices to rise by 5.5% this year and 2.5% next year. But this year everything turned out different than we expected. For some, the falling house price may offer opportunities; especially for starters, the crazy housing market made it virtually impossible to buy a house in recent years.