Housing market sees excellent start to 2016

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1 PRESS RELEASE To From : Finance/economics editorial departments and trade press : Dutch Association of Real Estate Brokers and Real Estate Experts (NVM) Subject : NVM housing market figures Q Date : Nieuwegein, 7 April 2016 Faltering movement up the housing ladder and falling supply leave buyers with increasingly limited choice Housing market sees excellent start to 2016 NVM Chairman Hukker: Consumers paying increasingly higher price to live in old city centres Nieuwegein, 7 April In the last quarter, the Dutch Association of Real Estate Brokers and Real Estate Experts (NVM) reported an increase in the number of transactions and rising year-on-year prices, in line with its forecast. However, there is still a lot of regional variation. Urban areas, and in particular, Amsterdam, Leiden and Utrecht and the city of Groningen are showing an above-average performance, says Ger Hukker, who today, for the last time in his capacity as NVM Chairman, presented the housing market figures. The first quarter of 2016 saw 34,810 sales of existing owner-occupied homes, up by almost 20% compared to the previous year. For the total existing owneroccupied homes market, the figure is estimated to be 45,000 transactions*. Prices also increased, by 1% (compared to Q4 2015) and 5.5% (compared to the previous year) respectively. The price of the average home sold remains almost 9% down on pre-crisis levels, but 11.3% higher than at its lowest point, says Hukker. The average time it takes to sell homes is falling: that figure is now 108 days, down by 17 days compared to a year ago. At the same time, the number of homes available for sale on the Dutch market is falling with ever-increasing speed. Midway through the first quarter of 2016 (the reference date for housing supply), NVM brokers had 117,256 homes for sale on their books, down by 17% compared to a year ago. Hukker: These are great figures and speak for themselves, but the downsides of a flourishing market, such as faltering movement up the housing ladder, caution among some consumers and the lack of new supply of both owner-occupied homes and good rental properties, are becoming increasingly evident. This is actually quite strange, in view of the current house prices, the absurdly low interest rate and increased consumer confidence. * The most recent quarterly figures published by the NVM are provisional. 1

2 Number of housing transactions up by over 20% year-on-year The growth in the number of transactions seems unstoppable. In Q1 2016, almost 20% more homes were sold than in the same quarter a year earlier. That makes it the 11th quarter in a row with a year-on-year increase in the number of transactions. The strength of the continued recovery comes as something as a surprise: after an excellent 2015, we expected to see a levelling off in the number of transactions, says the departing NVM Chairman. The low mortgage interest rate is the main driver of the housing market. In the last four quarters, NVM brokers have sold more than 147,500 existing owner-occupied homes (total market approximately 193,000 homes). Hukker points out that the first quarter of the year is always slightly down on the previous quarter for seasonal reasons. This is indeed the case: there were 12.4% fewer transactions than in Q The proportion of sales accounted for by terraced homes fell, while the share of apartments saw an increase. The sale of detached homes increased by more than 25% in Q compared to the same quarter last year. Interestingly, the NVM region of Amsterdam bucked the trend in terms of the number of transactions. In contrast to the nationwide trend, the NVM region of Amsterdam saw the number of transactions fall by 2% compared to a year previously (nationally +20%). Hukker: This shows how the market in the capital is overheated, with insufficient new supply to meet market demand. The market is virtually boiling dry. Number of homes sold (x 1,000) Average sales price rises for ninth quarter in a row This is the ninth consecutive quarter to see a year-on-year increase in the transaction price of the average home sold. In Q1 2016, the average transaction price ended up at EUR 225,000. The average price of homes sold is 5.5% higher than a year previously. Prices have also started to increase faster, says Hukker. Price rises were particularly marked in regions where the owner-occupied housing market is tight. The bestperforming region is Amsterdam, with price increases in excess of 20%. But also in the surrounding regions, such as Zuid Kennemerland (Haarlem) and the bulb-growing region (Bollenstreek) price increases are still well above the national average, at 10%. 2

3 Compared to a year previously, the increase in prices of more expensive types of homes (semi-detached and detached) is lagging slightly behind less expensive types of homes. For the more expensive homes, prices saw an annual increase of approximately 4%, whereas for less expensive types of homes, that figure was around 6%. The bigger the market for a particular home type, the lower the increase in price. Interestingly, detached homes actually saw a quarter-on-quarter fall in price, which would appear to be a correction to the good final quarter of Since the housing market reached its lowest point after the crisis, the price of homes sold has increased by more than 11.3%. Hukker: There is not a single region in which there is a continuing downward trend in sales prices. Trend in sales (compared to a year earlier) 3

4 Price trend (compared to previous quarter) Average over the last 4 quarters. Houses selling faster The time to sale of the average home sold in the last quarter of 2016 was 108 days, or 3.5 months. That is a year-on-year decrease of over 11%. Apartments saw the strongest fall at more than 20%, with end-terrace homes falling the least, by 3.6%. As always, there are significant differences in the time to sale for different types of homes. Mid-terrace homes took an average of 75 days to sell, whereas for detached homes that figure was 205 days. The year-on-year fall in time to sale was particularly marked in the NVM region of Amsterdam and the surrounding regions, with the bestperforming reaching as high as 40%. In Amsterdam, houses took an average of only 29 days to sell. 4

5 Time to sale for sold homes (in days) Time on the market for current housing supply (in days) Only minimal difference between asking and sales prices The difference between the final asking price and the ultimate sales price stabilised in the last quarter. An average of 3.4% less than the final asking price was paid for the average home sold. Hukker: The difference between the original asking price and the transaction price continues to fall. The proportion of homes sold at the initial asking price is also increasing. For homes sold having been on the market for less than a quarter, the average difference between asking price and the price paid is around 2%. As for homes 5

6 sold after being on the market for more than three years, the difference between the transaction price and the original asking price is still more than 18.5%. In Q1 2016, 10% of homes sold achieved more than the asking price. Increasing numbers of sellers feel that they do not need to adjust their asking prices in the current market. Despite this, for a large group of consumers, whose homes have been on the market for some time, a change to the asking price is an important opportunity for attracting interest, says NVM Chairman Hukker. Housing supply continues to fall The number of homes available for sale on the Dutch market is falling with ever-increasing speed. Midway through the first quarter of 2016 (the reference date for housing supply), NVM brokers had 117,256 homes for sale on their books, down by 17% compared to a year ago. Even compared to the previous quarter, the number of homes for sale has fallen by as much as 8.8%. In the total existing housing market, there are currently 153,000 homes available for sale. Of all of the types of home, apartments account for the strongest fall in supply: 26.6% compared to last year. The supply of detached homes has fallen the least, by 9.4%. Hukker: The fall in the housing supply is not only being caused by an increase in sales, but also the fact that too few homes are coming on the market. Whereas the sale of homes increased year-on-year by almost 20%, this quarter saw the new supply increase by only 2.8% year-on-year. Here too, apartments are particularly badly hit. To some extent, the market is so overheated that it is virtually boiling dry. In theory, it would now take around 11 months to sell the supply available in Q1 2016, assuming no new homes come on the market. At the height of the crisis, that figure was almost 2 years and 2 months. Trend in housing supply (x 1,000) 6

7 Trend in housing supply 7

8 Trend in housing supply (compared to a year earlier) Buyers have an average choice of 10 homes The NVM shortage indicator provides an approximation of the options available on the housing market for potential buyers. It shows the relationship between the number of homes available and the number sold. As the housing market picks up, the choices available to buyers become more limited, says the NVM Chairman. In Q1 2016, the average consumer had a choice of 10 different homes, whereas that figure was 15 just a year ago. Several years ago, at the height of the crisis, potential buyers had a choice of between 25 and 30 homes. Hukker: The number of homes available for sale continues to fall as the number of potential buyers increases. Looking at the nationwide picture, there is still no sign of a sellers market. However, the sellers market is strong in some areas. These areas tend to be urban areas, with a high percentage of supply that sells quickly, creating a strong demand and an upward pressure on prices. 8

9 Shortage indicator. How much choice do consumers have? 9

10 Shortage indicator trend, terraced homes Regions vary in terms of their dynamism, but many are playing catch-up There is no such thing as the Dutch housing market: every region is different and differences can also emerge within regions. This not only applies to the structure of the housing supply, but also the balance between supply and demand. All kinds of developments, of a demographic, economic or infrastructural nature, can have an influence. This is why Hukker believes that an NVM broker can prove indispensable in helping to analyse housing market trends within a specific neighbourhood or district. In order to interpret the differences within the Netherlands, the NVM compares the housing market regions in terms of a series of dynamic characteristics, such as price trends, transaction numbers, sales quotas, time on the market, etc. and awards a rating to the different regions on that basis. The map of the Netherlands clearly shows that the NVM region of Amsterdam, and now also Utrecht, outshine the other regions. The regions around Amsterdam and Utrecht also show relatively high levels of dynamism, in common with the city of Groningen. The regions of the country with above-average dynamism are often those that include a major city, such as Rotterdam, The Hague, Eindhoven and Enschede. Areas that lag behind the others are the north-eastern regions of Noord-Brabant, to the south-east of Groningen and the Den Helder region. Hukker: In terms of dynamism, we are also seeing an upward trend in many regions. Last quarter, lots of regions had lower dynamism than the national level, and that number has now fallen slightly. It is to be hoped that there will be a slight improvement in dynamism across the board next time. 10

11 Transaction price, terraced homes Differences in levels of dynamism by region. Based on figures for the last year 11

12 Stagnating housing market movements despite favourable conditions With so many signals now pointing in the right direction, NVM Chairman Hukker is surprised that housing market dynamism is not more positive than is the case. You would imagine people would start camping outside real estate offices in the hope of securing a house first. House prices are low or in many cases realistic, the mortgage interest rate is at an historic low and now is therefore an excellent opportunity to buy a home. Thanks to the realistic prices, vendors can sell their houses more quickly and easily and there is a good chance that the interest payment on the new mortgage for their new home will be significantly lower. But Hukker feels that this is not happening often enough. He outlines various possible reasons for this. First of all, there is the issue of negative equity. Around 800,000 households in the Netherlands have a home with a market value lower than their mortgage debt. The majority of them stay put, partly because they do not want to or cannot face the issue of the negative equity and partly because the stricter rules mean it is no longer possible to finance their dream home. Only a small proportion of them around 5%, or 40,000 households are inclined to make the move. Half of that group are able to pay off the negative equity, and the other half cannot. As a result, this is an important factor in preventing people from moving up the housing ladder. More generally, Hukker notes that, despite the increased consumer confidence, large numbers of people remain cautious. They do not have the nerve to grasp the nettle and take what might be a step too far. Consumers are also becoming increasingly calculating and for others, the shock of the crisis remains uppermost in their minds. People are apprehensive about whether a potential new home would maintain its value, afraid of paying too much or seeing prices stagnate. All of this is preventing movement up the housing ladder. Over 55s increasingly reluctant to move house Another factor in the stagnating movement relates to the fact that the over 55s are increasingly choosing not to take the step of buying another home. According to research commissioned by the NVM and conducted by RenM/Matrix this week, their willingness to move house is half that of people below 55. The survey s most important conclusion is that 15% of homeowners over 55+ are inclined to move house, compared to 26% of those who own homes under that age. In addition, the over 55s have a particular preference for apartments (66%) and a smaller home (62%). More than three-quarters of the over 55s surveyed said that their current home needed only slight adaptations to enable them to remain living in it independently and comfortably into later life. Finally 22% of the over 55s ultimately want to relocate to a special home suitable for the elderly, whereas 46% are not yet sure. Hukker: The over 55s are increasingly facing the issue of regulations limiting mortgage finance. Whereas they may currently be paying an interest-only mortgage relatively easily, if they change mortgages or move house, this will involve having to switch to a repayment mortgage. This is putting a brake on people s attempt to move further up the housing ladder. As is the case for single people, regulation will need to be adjusted to more effectively meet the needs of this ever-growing group of older homeowners. Single people increasingly priced out of expensive inner-city homes People who wish to live in Dutch cities are finding their choice of home increasingly expensive. This primarily affects student cities and those with historic city centres. Hukker predicts that the overheating issue will soon go beyond Amsterdam, Utrecht, Leiden and Groningen and start affecting other old city centres in the Netherlands. This is set to hit younger people and single households the most. Single people are finding it increasingly difficult to buy a home in the large and popular cities. The rules on lending have been tightened and house prices are increasing disproportionately in these areas. How can a single person with an income of EUR 45,000 hope to finance a home worth 12

13 EUR 200,000? It is impossible, quite aside from the issue of whether there are actually homes available in that price category in the cities. If I was a policymaker, I would be seriously looking for a solution for this group of single people, which is becoming an increasingly large group in Dutch society. According to Hukker, the current rules and standards fail to cater for them. There need to be arrangements for them. For example, we have known for some time that people have been entering the housing market at a later age, when they are already in a relationship. The changes to the regulations that have been introduced by Nibud (the National Institute for Family Finance Information) to include 50% of the second income in the finance percentages has made an effort to help them. Single people on the other hand, have been left empty-handed. More flexible mortgage rules required to keep homes affordable Recent years have seen significant tightening in mortgage regulations and the perception of risk has improved both among consumers and mortgage providers. However, this new regulation hits middle incomes, first-time buyers and single people hardest and is failing to achieve its aim, argues Hukker. Particularly in the major cities, owneroccupied homes are becoming increasingly unaffordable. A relaxation in regulation is essential in the short term in order to prevent these groups from being completely excluded from the housing market. The loan-to-value-limit puts many homes out of reach for first-time buyers and must not be lowered any further, in my view. Mortgage providers are applying the income test and assessment method in such a way in practice that people wishing to move up the housing ladder and take advantage of the low interest rate cannot switch mortgages. The compulsory 100% repayment rule also means that middle incomes have unnecessarily high housing costs. If this was reduced to 50%, it would be possible to manage the risk of excessive credit whilst creating an opportunity for groups to finance their own homes who currently have only limited opportunities on the housing market. Newbuild homes: another significant increase in sales and prices A total of 7,600 newbuild homes were sold in Q1 2016, an increase of 34% compared to the same period last year. This means that the newbuild market, hit badly in the crisis, is recovering even faster than the existing housing market. With a choice of nine new build homes on average for each buyer (shortage indicator), the situation in the newbuild market is even worse than in the existing housing market. Hukker: There is an increasingly visible seasonal trend emerging in the marketing of newbuild projects. Project developers and agents are deliberately opting not to launch their sales in the Christmas or summer holidays, but in the spring or autumn. Overall, there has been a marginal increase in the supply of newbuild homes on the market, with 22,600 for sale in the first quarter. Newbuild homes are becoming increasingly large and expensive, seemingly bringing an end to the deliberate focus on developing flats for first-time buyers and instead developing more newbuild for people moving up the housing ladder. Half of the newbuild homes on offer have a surface area of 120 square metres or more. With an average transaction price of EUR 272,000, prices have increased by more than 10% in the space of a year. The sale of increasingly larger homes accounts for half of the price increase. The transaction price per m2 increased by only 5%. 13

14 Call for more newbuild tailored to need As the Dutch population is predicted to increase, we are seeing growing pressure on the housing market, argues Hukker. Newbuild homes will not provide a solution to the shortage of homes in the short term. That is set to continue to increase until It is also important for newbuild homes to be built where they are needed. By that, I not only mean in terms of location i.e. in the cities but also with a view to the varied society of 17 million people living in the Netherlands. Newbuild that is tailored to a specific need, focusing on providing good housing for all types of different people: young and old, rich and poor, those in permanent employment and the self-employed, not forgetting refugees and people granted temporary residence status. Municipalities should shape diversification in housing needs Another area that still needs attention is the diversification of the housing programme, argues the NVM Chairman. Local municipalities are now increasingly focusing their strategy on the changing population structure and the ensuing housing needs. In the years ahead, this will need to begin to take shape. Whether this will prove successful remains to be seen. Will government authorities be tempted yet again by the shortterm, if lucrative, demand of market players or will they stick to their long-term housing strategies? This is particularly relevant for programmes still at the early stage of planning that have not yet been backed up with hard figures. NVM Open House Day continues to meet important need Hukker is pleased with the continued success of the NVM Open House Day held twice a year. Although there were 5,000 fewer home owners participating on 2 April than last autumn a side-effect of the fact that there are currently fewer homes for sale the NVM Chairman is convinced that the day offers homeowners an excellent opportunity to showcase their homes. As many as 30% of the homes that participated NVM Open House Day in October 2015 had been sold 12 weeks later. For homes that did not take part, research shows that figure to be 17%. It is therefore very much worth taking part. A total of 37,000 homeowners took part in the last NVM Open House Day, attracting as many as 135,000 viewers. It is a phenomenon that has remained popular, says Hukker. It also still helps to sell homes faster. We noticed that the housing website Funda achieved record visitor numbers in the period around the NVM Open House Day. NVM brokers also saw the number of houses sold subject-to-contract increase in the week leading up to it. Basically, the NVM Open House Day gives a boost to sales. It s also a fun occasion, for everyone involved. Bridge-builder Ger Hukker stands down after nine turbulent years After nine turbulent years, Ger Hukker is standing down as chairman of the NVM. He will take his leave on 18 April at a special event entitled Building Bridges in The Hague. Hukker s chairmanship has been a period of cooperation, bridge-building, and dialogue in an effort to improve the Dutch real estate market. At the event to be hosted by TV's Jeroen Pauw, the bridge-building will be enlivened by such leading names as Neelie Kroes, Daan Roosegaarde, Klaas Knot and Stef Blok. That afternoon will also see the launch of a book in which 50 experts from a range of backgrounds present a wideranging picture of the real estate market of the future and the lessons learned from the crisis. Hukker: The financial crisis started shortly after I became chairman. As we all know, it had a major impact on the housing market. All in all, the crisis lasted a long time, but fortunately the turning point came in late For the NVM, this was no easy period, but we emerged from it successfully. Relatively few real estate agents had to close. In the years ahead, there are plenty of opportunities for entrepreneurs with aspirations. People who will chart new courses and expand their proposition with new and different services. People who dare to make choices. The departing chairman is unambiguous about the theme of Building Bridges : Society is becoming increasingly varied and has growing numbers of interest groups representing their corner. The same applies to real estate brokers and experts. The art of the 14

15 profession is to see things from others perspectives, exploring what their problems and interests are. Ultimately, it is all about empathy. If you then focus on your own problems once in a while, you realise that you reach a different view and take an alternative approach. This is often simply about working together and tackling issues together. It involves new perspectives and new attitudes, because you need to listen and make concessions. Sticking your head in the sand is no way of solving problems. Bridgebuilding is important and ultimately comes down to working together. New NVM Chairman Ger Jaarsma intends to continue building bridges Ger Jaarsma becomes the new NVM Chairman on 18 April. Originally from Friesland, he was the CEO at Kredietbank Nederland until very recently, a position he held for more than six years. At the NVM, Jaarsma intends to follow the route set by Ger Hukker, but in his own way: building bridges towards all relevant stakeholders in the real estate market. Jaarsma: By working together and engaging in dialogue, I hope to help the Dutch real estate market to advance a step further. It is important not to fall back into our old ways, but to learn from these years of crisis instead. All of us, including the NVM, face the important challenge of providing direction to the new and increasingly changing social and market conditions and trends. This is why I will actively seek out dialogue and aim to achieve practical and achievable solutions. Within the NVM, Jaarsma also faces his own important challenge: developing the new strategy, the NVM Vision As the chairman of a very varied association of entrepreneurs, it matters to me that the new strategy enjoys broad support, both internally and externally. If we achieve that, it will ultimately lead to commercial success for our members, even if that may not be the main aim of an association like the NVM. Forecast for Q2: 10-15% more transactions and a slight increase in prices Hukker expects to see another successful quarter in Q In the quarter ahead, the number of transactions is expected to increase by 10 to 15% compared to the last quarter. That is the normal seasonal trend, explains the NVM Chairman. On an annual basis, that would mean around 200,000 transactions for the total existing owneroccupied housing market. Quarter on quarter, prices are expected to increase by at least 1%. Regional differences are likely to remain significant. In overheated areas, quarteron-quarter prices may even increase by as much as 5%, whereas in regions where a buyers market persists, prices are expected to remain more or less level. NVM member numbers continue to increase In the first quarter of 2016, the number of brokers and experts affiliated to the NVM increased by 42 members. The NVM currently has 4,111 members. Of these, 3,626 are active in the housing market. At the end of March 2016, the number of NVM-affiliated branches was 2,944, which is 8 more than the previous quarter and 92 more compared to March Of these, 2,659 are active in the housing market. The other firms operate in areas such as commercial or agricultural property. Note to editors: For more information, please contact Roeland Kimman, Communication, Media and Representation. Telephone +31 (0) , mobile +31 (0) kimman@nvm.nl 15