Still more young starters active

Almost all of us are suffering from the rapidly rising house prices. Except, of course, for the sellers, who try to get the most out of it. Because thanks to the surplus value, they can often finance a – again more expensive – home themselves. Young first-time buyers are at a disadvantage, not least because the supply of affordable homes for them is often minimal.

Nevertheless, the share of home buyers under the age of 35 has increased slightly in the past year, Rabobank’s quarterly report shows. In the period August 2020 to July 2021, young homebuyers accounted for 47.8% of all transactions on the housing market. In the same months a year earlier, that share was 45.4%. It may be an effect of the abolition of the transfer tax for first-time buyers on January 1 of this year, while this tax was actually increased to 8% for investors. It may be that, as a result, first-time buyers have been able to make the winning offer a little more often.

Of course, it has not led to a reduction in prices, because we are now seeing stronger competition among the young adults on the housing market. I also argued at the time that this tax break would result primarily in stronger price increases. And those will continue in the coming years, as long as there is not a lot more and affordable construction. This year, that price increase could be as much as 15% total. Rabobank foresees a further increase of 11.5% for next year, where ABN Amro expects 10%.

Unlike until recently, mortgage rates are now rising slightly, leading to a boom in mortgage applications last week. At De Hypotheker, for example, 15,500 to 16,000 applications were received in the past two weeks, good for a place in the top 5 of the busiest weeks in ten years. Many people still want to take advantage of the low rates and refinance their mortgage. Yet mortgage rates are still at historically low levels and housing affordability is not really in jeopardy, despite all those price increases. But with the staggeringly low supply, the housing market will remain crowded no matter what. And in the process, lower-income first-time buyers will find it increasingly difficult.