Is the current Amsterdam Property Market too hot for you? Mortgage expert Henk Jansen of Expat Mortgages explains the current situation and shares some valuable tips for prospective buyers.
Many of us have noticed how rapidly and aggressively the Amsterdam property market has been growing. In 2008, the price of property in Amsterdam spiked to an all-time high. Subsequently, from 2009 to 2013 the market fell a good 20%-30%, only to take off in 2014 and soar even higher than before. This first quarter of 2016 saw a frenzy of property purchasing, such as the city might not have ever witnessed before.
Henk, can you share with us a little bit about what’s happening in the Amsterdam property market right now?
What’s happening is that in the matter of a year, the market has changed from a buyer’s market to a seller’s market. Prices are at an all-time high, mortgage rates are very low, and everyone is out to grab whatever is available.
If you want to buy a home right now, you are likely to be faced with the situation where you have to make an aggressive decision, fast! At least 50 people will show up to see a house; if it’s a nice house, expect even more viewers. If someone doesn’t make a knockout offer that takes the property off the market within a few hours, then expect up to 20 offers, sometimes 1/3 of which will be 10-20% above asking price. What happens next is outrageous at worst and unfair at best…the selling agent will ask the highest bidders to re-bid and give a short deadline by when to do so. Another situation with very popular houses is a sealed bid process, with a deadline within a week of the property coming on the market. Considering that you might only get an appointment to see the house on the day of the deadline itself, you might find yourself forced to make a very quick decision.
Why this sudden and extreme swell in the market?
It’s the situation where ‘sleeping’ potential buyers woke up. They were waiting for the past four years and now they’re all out to get the property they want. If somebody sells a property, that person is also a potential buyer for another property. So, if a house gets sold, correspondingly, the number of potential buyers also increases. I suppose it’s like a rolling snowball - it starts small at the top (1 seller, 1 buyer) and it ends very big at the bottom (100 sellers, 1000 potential buyers). Houses are being sold in all price ranges and all across the city. If you have a slightly lower budget, think about looking for a home in Amsterdam North or around Indische Buurt amongst some others –these areas have great potential and are likely to increase in value in the future.
What happened in 2013 that lead to this reaction in the market in 2014?
In 2013 a few things changed:
- Until then, everybody was able to borrow ‘interest only’ (no repayment). Since January 1, 2013, a capital repayment mortgage is mandatory.
- Up till 2013, the maximum LTV (loan to value) was 110% or even 112%. Since 2013, the maximum LTV is 106%, going down 1% per year. The 2016 maximum is 102% loan to value.
- Between 2011 and 2015, rates went down from 5,5% to 3,5% - an incredible decrease. But even last year (2015-2016), rates went down another 1% from 3,5% to 2,5%. Lowest point in time ever, and we don’t expect a sudden increase.
Many people look on Funda to find houses for sale and it seems simple enough to buy a home on your own. I’d like to know what you think - can you buy a house without a real estate agent?
No! Within the Amsterdam ring you certainly can’t. The seller’s agent will not take you seriously and you might end up losing a property you really want.
Henk explains that there is a sort of “grey boy’s club”, the “makelaar (real estate agent) inner circle”. Funda is a good interface to see properties that come on the market; however, some properties will be sold within hours of landing on Funda and some even before that. These little circles of property dealings can only be entered if you have an agent who belongs to this club of makelaars and gets information about potential sales before they are officially announced online. To get access to one of those properties might save you the trouble of viewings, bids, sealed bids, and bidding wars later on.
What do you think about everyone jumping into a property deal without a clause of financing?
This is ridiculous! Don’t do it. Unfortunately, if you don’t throw that caution to the wind you might never find a house.
If we find ourselves compelled to make an offer without an exit clause, can we take any precautions?
Of course, you must take precautions - always consult with a professional, experienced mortgage expert beforehand and don’t do it online. You can also ask your makelaar to check details about the value of the property with the Kadaster (registry). If you can, get information from a structural engineer about possible asbestos in the building and the foundation of the property. Finally, check your credit rating from the Bureau of Credit Rating well in advance of making an offer on a house without clause of finance.
Is there any possibility of working with foreign banks to buy a property?
Unfortunately, there is not such a possibility at the moment. ABN-AMRO, ING, and RABO are the biggest banks in the market. There is definitely room for foreign banks, but the regulations are so tough that it’s not seemingly attractive or inviting for foreign banks to come in. It feels like a banking cartel.
In spite of the difficult situation, many of us want to buy a home; do you think it is still interesting to buy a house?
Yes. The mortgage rate might go even lower and property prices will go even higher. Even if you end up paying 10-15% more, the low rates will take care of the difference.
Finding a dream home is not easy, but when you do, here are some tips to make the rest of process as smooth as possible.
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Tasneem Mohamedbhai is originally from India and now lives in Amsterdam with her Dutch husband and their two children. She has been a writer and editor for the last 15 years. In 2012, she started her own company, Mumbai Mills, that sources and creates lifestyle products. She also publishes an annual agenda, 'The Mumbai Diary'.