The price is the proof!

The advertising slogan “The price is proof!” was once in use by a large clothing department store and served to support another slogan that indicated that the clothing from these stores was “more economical after all. Conversely, a higher price is sometimes used to prove that what is delivered is of excellent quality. Not cheaper, but better’, an Internet provider once said. Looking at the housing market, the current high prices say nothing about quality, but they do say that the shortage on the housing market is enormous. The average price for an existing home sold at the end of last year was €365,000 and that is 11.6% more than a year earlier. So the house has increased in value by more than 10% in one year, probably without any significant change in quality. Prices are rising because there is enormous scarcity. Armies of interested parties are bidding well above the asking price. And borrowing is cheap, which continues to help.

Rabobank economists, meanwhile, have revised their forecast for this year upward. They expect house prices to rise by an average of 8%, whereas they had previously assumed 5.5%. The upward revision has to do with an improved economic outlook. The corona crisis has – so the RABO economists expect – less negative impact than previously expected. In addition, they point to the continuing tightness in the housing market and low mortgage interest rates.

The average price of a sold house this year creeps towards €395,000. That is bad news for first-time buyers with an average income. They can not borrow more than €166,500 (one-earner) or €300,000 (two-earner). Starters have therefore gained nothing from the abolition of the transfer tax reduction at the beginning of this year. It has only led to investors in the last quarter of last year still massively have their blow. While – as predicted – the financial benefit for first-time buyers has now been effortlessly wiped out by the price increases.
The housing shortage will continue to rise in the coming years, even if an energetic Housing Minister takes office after the elections. You don’t have to be a professor to make that prediction. So the outlook for first-time buyers unfortunately remains unabatedly bleak. We can’t make it any better, nor any easier, to conclude with a variation on an advertising slogan that the Tax and Customs Administration no longer uses either.