Scarcely a day goes by without another report appearing in the press about problems in the Dutch housing market, particularly when it comes to affordable rental housing or finding a place to buy.
House prices rose by an average of 8% in 2019, the amount of homes on the market is shrinking and there is little sign that things are slowing down.
Homeownership is, after all, something most of us aspire to at some point in our lives. Expats and international workers are no exception, given that so many – at least 50% according to some research – have no intention of ever leaving the Netherlands.
So now that house prices have reached record levels – the average price in Amsterdam topped €500,000 for the first time in 2019 – is now a good moment to take the plunge and buy?
It is a question that many of my clients have asked me recently. In particular, they are worried that if they buy now, house prices will drop in the next year or so and they could end up in negative equity.
I always tell them that yes, house prices are quite likely to drop and yes, they may end up technically owing more than the value of their home to their bank. But, I tell them, this fear of what might happen in the coming years should not stop them from buying now.
We don’t know when house prices will go down. All we know is that they will. But it is equally certain that prices will go up again, and all they need to do is sit it out. After all, they have to live somewhere, renting is effectively paying off someone else’s mortgage, and on average house prices double every 20 years.
Record low-interest rates are another thing to take into account at the moment. In February 2020 you get a rate of 1.75% on a 20-year mortgage, a fraction higher if you want to go for the maximum 30, down to as low as 1.2% if you are going for the short-term gamble.
We all know interest rates have been going down steadily but can they go down much lower? The new record lows are evidence that the banks have given up on any rise in the short term. My guess is they will drop a little further, so should you wait?
This time the answer is no. The marginal shifts which may still be to come will only have a minor impact on your repayments and at 1.75% for 20 years, you are buying security long-term. Some 20 years ago, you would have been paying around 6% and that was a bargain compared with the 9% rates in 1990!
Of course, if you are likely to move in the intervening period, it is wise to make sure that you can transfer your low-interest mortgage to a new home – not all mortgage providers allow this. Young people, for example, tend to move every seven or eight years, so it is worth checking this out properly.
But all in all, there are no reasons not to buy a house in the current market – if you can afford one. Today’s high record prices are no reason to wait it out for the downturn. And today’s record low-interest rates are every reason to seal the deal before they start rising again.