More nervousness in the market

Mortgage rates are rising at lightning speed, many newspapers and housing market watchers report. And they are. At the same time, those mortgage rates are still low. Of course, because the rate is coming from a historically low level, the rates of increase look enormous. Last week, a mortgage with a 20-year fixed rate came out to 3.7% on average, where it was 1.8% in October last year, according to Van Bruggen Adviesgroep. That is a doubling and that is easily the ‘biggest interest rate increase of this century’. But let’s not forget that we had to deal with much higher rates for large parts of this century and that a few years ago we called a rate of 3% ‘historically low’.

That it makes the market somewhat nervous is of course logical. In any case, for potential buyers it means that they can borrow less. Especially for first-time buyers, this is problematic. After all, unlike many people who move on, they cannot benefit from substantial surplus value on their own home. The choice of a shorter fixed-interest period with lower rates can sometimes still offer some solace. The steep price rises, sharply rising inflation and the ongoing war in Ukraine also contribute to nervousness on the housing market. Naturally, there is considerable speculation about the consequences of all this for house prices.

People who want to sell their homes are now bringing that decision forward for fear of future price falls. As a result, supply has increased somewhat recently, although the market remains tight. Experts expect that there will only be potential price decreases at mortgage rates above 4 to 5%. At the same time, the demand for housing is still so enormous that I don’t see selling prices falling 1-2-3 yet. Of course, we’re going to see a flattening of the increase rates of between 15 and 20% to which we were almost getting used. But for this year I still expect an average price increase of around 8%. Unfortunately, the cost of new construction is rising further due to the scarcity of building materials and labor. The ambitious plans of Minister De Jonge (a minimum of 30% social housing in new construction plans) – if he is going to make it happen – will not increase the financial feasibility of projects either.

This means that the situation in the housing market can be characterized not only as nervous, but also as confusing. On a more positive note, employment trends are improving: more people than ever have jobs and the labor market is crying out for extra hands and heads. This means that household incomes will rise: people can work more at higher wages. That can then keep the housing market going after all.