New data from the Kadaster shows that more than half of the 12.000 houses sold in the Netherlands in May 2014 were to buyers under 35 years old. The increase in willingness and ability to purchase within this market segment is strong evidence that the worst of the 2013 housing crisis is over.

However, while there is also an uptick in confidence in the housing market from young homeowners, they remain one of the groups most affected by the overvaluation of homes during the 2008 bubble.

More homes sold per month

That approximately 12.000 houses were sold in May is welcome news for the recovering Dutch housing market. At the beginning of 2013, the average number of homes sold per month remained between 6.000 and 8.000.

In the second half of the year, the number rose to around 10.000, possibly due to the willingness of owners to sell their homes at a loss.

While positive, the figure of 12.000 remains far below the 16.000 to 18.000 homes sold per month before 2008. Yet such a comparison must be made with caution considering the ease in access to finances and subprime mortgages that affected many housing markets at the time.

Young buyers increase, young homeowners still struggle

Although young buyers are driving sales, of all households under 35 years old, only 18 per cent own their house.

In total, 28 per cent of home owners in the Netherlands remain locked into paying mortgages that are higher than the current market value of their house. However, of this group paying mortgages higher than the market value of their property, at least 68 per cent are under 35.

According to reports from the Rabobank, the youngest property owners (up to 24 years old) are especially worse off due to the prevalence of financing through interest-only loans.

Interest-only loans can be especially damaging after periods of overvaluation as borrowers pay off only the interest for the duration of the loan resulting in a stable, over-priced payment with no amortization of the principle.

With average home prices decreasing more than 20 per cent since 2008, the under 35 group of homeowners is disproportionately effected as their housing careers were often more severely impacted by the real estate bubble.

Increased confidence of homeowners in market

In their most recent quarterly report, the ING has released data showing that the housing index, which measures confidence in the housing market, has risen three points in the second quarter to 114 (base 100).

ING attributes this increase to the positive outlook that the number of homes sold per month, as well as the price at which those homes are sold, will continue to increase, especially in the eyes of young home owners.

Furthermore, the report notes that 44 per cent of homeowners are prepared to take a loss of up to 30.000 euros to sell their current home and co-finance this amount while buying a new home.

However, a third of those surveyed were not prepared to incur a loss on the sale of their home and 17 per cent remained unsure about selling for a loss.

The report indicates that this may be due in part to the lack of knowledge regarding the possibilities of co-financing outstanding debt during the process of purchasing of a new home.

Still, in light of this increased confidence, the International Monetary Fund warned last week in a report on new possible housing bubbles that, when compared to average incomes in the Netherlands, homes are on average still 20 per cent overpriced.
 

Sources: Het Parool, Trouw