Again good news for home seekers and bad news for sellers. Houses have become cheaper again in the past quarter, they have been on the market for longer and massive outbidding seems to have come to an end.
After years of price increases and crowding at viewings, the turnaround in the housing market that started last year is continuing. This is evident from the latest figures from real estate agency NVM. About 70 percent of the industry is affiliated with it.
The average price of resold (existing) owner-occupied homes fell by 8.2 percent on an annual basis in the past three months, the largest drop in ten years. The average selling price of an existing home was 394,000 euros.
And while in the last quarter of 2022 there was still a slight overbidding (on average by 0.1 percent), and a year earlier still significantly (8.1 percent), that has also changed. Underbidding seems more common now. On average, buyers paid 1.3 percent less than the asking price in the past quarter.
Sellers have become more cautious as a result of this price drop. As a rule, they wait to buy a new house until the current one has been sold. Partly as a result of this, the number of homes put up for sale fell by 9 percent in the past quarter, compared to a year earlier. But because homes have now been on the market for almost three times as long on average, the total supply is much larger than at the time: almost double.
Buyer’s market
Is the buyer’s market back? Not that again, says the NVM. To assess whether supply and demand are in balance, the association uses a ‘shortage indicator’. If it is less than five, then there is a market that is better for sellers than for buyers. The supply is then low and the demand is high, which means that transactions are fast. If this number is above ten, then buyers are in charge: there is a lot of supply and they can take their time to choose. Between five and ten, both sides are reasonably balanced.
Currently, the indicator is at 3.3. So there is no balance, but buyers already have it a little easier than in 2021, when the indicator was at a low of 1.3.
In addition, despite falling prices, home buyers are not always cheaper on balance. One of the main drivers of the fall in prices is the rise in mortgage interest rates. This makes borrowing money more expensive and the monthly housing costs higher, which can compensate for the advantage of a lower purchase price in the long term.
Read also: The psyche of the housing market. “If people think the price is going to fall, it will fall”
Especially in combination with the rapidly rising cost of living, inflation, it is therefore still very difficult, especially for ‘buy starters’, to secure a place on the housing market. They have no surplus value or current mortgage with a low interest rate to take with them, and therefore start at arrears.
What is the current market situation for four housing types distinguished by the NVM?
New construction – sales are declining
The changes in the market are particularly visible in new-build homes. The number of new homes sold fell compared to a year ago, while the supply increased sharply at the same time.
Partly because it can sometimes take years before a new-build house is completed, candidates have become more hesitant. As a result, it takes developers, on average, more time to reach the minimum number of pre-sold homes they need to start construction. In practice, this means for people waiting for a home to be built: double housing costs for longer. The combination with uncertainty about one’s own financial future and a possible falling price for the current owner-occupied home makes prospective buyers wary.
In addition, the construction industry is struggling with sharply increased costs, which means that new-build homes cannot fall much in price. That makes them less attractive. An average new-build home costs 468,000 euros, which is considerably more than the average price of a house that has already been built.
Apartment – strong price drop
Of all housing types, the largest price decrease can be seen in apartments. Since prices started to fall last spring, apartment prices have fallen by an average of 12 percent. By way of comparison: detached houses fell in price by 7.4 percent in that period.
Housing prices have fallen most recently in the major cities, where most apartments are located. In the previous period, the housing shortage was greatest in the cities, which was also translated into sharp price increases. A lot of demand and little supply led to considerable outbidding here. Now that the trend has reversed, prices are also falling the hardest here. Prices fell the most in Haarlem (minus 14.7 percent) and The Hague (minus 13.5 percent).
Terraced house – short sales time
Those who wanted to leave their home quickly benefited from owning a terraced house. Together with apartments, this type of home sold the fastest in the past quarter: it was on the market for an average of 38 days.
Sales are fastest in parts of Groningen and North Overijssel (31 and 34 days). In the Zaanstreek and Zeeuws-Vlaanderen it takes twice as long on average.
This may be because few terraced houses were put up for sale in the past quarter – the fewest of all house types – and so there is a certain scarcity. The supply of these houses was 14.4 percent lower than one year previously. At 7.2 percent, the price drop in that period was the smallest of all types of housing.
Detached – fewest sales
Detached homes experienced the greatest decline in sales figures: last quarter, 8.2 percent fewer were sold than a year earlier. The sales figure for terraced houses and semi-detached houses remained stable.
This is probably related to the price of detached houses, which averaged 579,000 euros, a decrease of 9.8 percent on an annual basis. The NVM notes that the more difficult economic situation is mainly depressing sales of houses in the more expensive segment. More homes were sold for homes worth up to 200,000 euros.
It is striking that some areas, including Southeast Drenthe and Northeast Overijssel, do not show any price decreases. According to the brokers’ association, this is because house prices in those regions have risen less sharply in recent years, so that there is no question of a correction now. In particular, detached houses and semi-detached hairdressers are still rising in price and are facing overbidding.