Overbidding on a house the new normal?

price bid log real estate pro

Effect of the Corona crisis on the housing market

At the beginning of the corona crisis, banks were still predicting that house prices would stagnate or even fall over the next two years. The time of overbidding on a house would be over. Especially the consequences of the recurring lockdowns would have a major impact on the Dutch economy and consumer confidence.

The consequences of an economic crisis are usually not visible on the housing market until later. These acyclical market movements are comparable to those during the previous economic crisis, when it also took several years for the effects to become visible on the housing market and for the market to finally recover.

Against all odds

However, the hoped-for cooling of the housing market never materialised. The acute shortage of houses and the large amount of finance available mean that more and more houses are being outbid (at a high level). Last month, records were broken again; the housing market saw its highest price increase in 20 years.

A few practical examples: in Haarlem, a house was outbid last month by an average of €78,000, twice the average annual income. Another house was even outbid by €355,000. These examples are not isolated. Not only are there more and more outbids, there are also more and more.

WNL about the new norm of overbidding.

Starters in a tight spot

The rapidly rising house prices are causing a split in the housing market. On the one hand, there are owner-occupiers who automatically benefit from the increases. When they sell their home, there is usually considerable surplus value, which can be used to outbid them for a new home.

First-time buyers, on the other hand, do not have these resources and usually still live at home or in a rented house. The difference between the maximum budget and the value of starter homes is therefore growing by the day. Research by Calcasa shows that starters only choose from 5% of the total available houses.

What are possible solutions?

Especially in the big cities, smaller houses are increasingly being bought by investors in order to rent them out in the free sector. Due to the low interest rates, savings yields little these days, which is why many private individuals and companies start investing in homes. Investors can often outbid investors without having to reserve financing, which makes first-time buyers with a first mortgage less attractive.

The Cabinet is therefore working on a number of solutions. Last year, the transfer tax on starter homes was already reduced to 0%, while for investors it increased to 8%. By increasing the transfer tax for this purpose, it should become less attractive to buy up homes.

As a second measure to keep out investors, municipalities are increasingly imposing compulsory owner-occupation for new homes or homes up to the NHG limit. Amsterdam already started last year; Rotterdam, The Hague and Haarlem will follow this year.

Finally, it is increasingly suggested to abolish the 'jubilee fund'. At present, it is still possible for parents to give their children up to €100,000 tax-free for the sale of their own home. This amount was usually used to outbid a property. By abolishing this scheme, the difference between owner-occupiers would decrease.

Use of the bid log

Eerlijk Bieden introduced the bid log into the Dutch housing market in May 2021. After a successful pilot, the bid log proved to be a suitable solution for the misconduct in the estate agency sector. In November 2021, a parliamentary letter was published by Minister Ollongren stating that all estate agents must start working with a bid log, following the example of Eerlijk Bieden.

The bid log should give retrospective insight into the price formation of homes. This information can be particularly important for first-time buyers. The fact that all submitted bids can be found gives consumers insight into the pricing of homes. This information can be taken into account when bidding on the next house.

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