Is there any perspective on the housing market?

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Buying a home, that sounds like Chinese to many students. It sounds like an impossible task, and more than 80% of students think the housing market is doing very poorly. Is the housing market really that bad, or are there opportunities after all? In this article, we will take a look at the housing market situation for recent graduates.

Impact Duo

First, student debt plays a role in monthly costs. This has an impact on the maximum mortgage you can get. When student debt is accumulated under the current loan system, mortgage lenders assume a weighting factor of 0.35%. This means that 0.35% of the study debt is assumed to be repaid monthly. In concrete terms, this means that if you borrow €1000 per month for 4 years, and thus have accumulated a total student debt of €48,000, your monthly costs for the student debt will be €168 per month. So this cannot then be spent on living expenses, and will be deducted from the maximum mortgage you can get. If you fall under the old pre-2015 system and received a basic scholarship, a weighting factor of 0.65% is used because the study debt must be repaid in 15 years instead of 40 years. Students who fall under both systems can choose which repayment period they take, and depending on that, the weighting factor is determined. However, during the initial phase of repaying student debt, mortgage lenders default to the 15-year repayment term for this group, resulting in a lower maximum mortgage. Duo does indicate for this that a statement can be submitted confirming the choice of repayment term in state, which should remedy this problem. The average student debt is around €16,500 for all students. The debt for people between the ages of 25 and 30 averages €20,300.

Income

Another essential factor for the maximum mortgage amount is income. The average starting salary after completing a WO master’s degree is around €2,500-€3000 gross per month. One year after completing the Master Finance, the average salary is €3,166. for the Master Accountancy, the average salary one year after graduation is €2,770.

Mortgage

Take the scenario that you complete the Master’s in Finance. After one year, you earn the average salary and have a permanent contract. You have a study debt of €20,300 under the new system, and you have no other outstanding debts. As a single person, you apply for a mortgage. The maximum mortgage you can get with these details is around €150,000. This is a 30-year annuity mortgage with 4.02% interest with a 20-year fixed-rate period. You will then pay €535 per month.

The current housing market

Is it possible to buy a starter home if you can borrow a maximum of €150,000? If you would like to buy a house in or around Tilburg, the cheapest houses start at prices around two tons. So without a personal contribution, it is already impossible to buy a house in this situation. A minimum contribution of €50,000 is needed, excluding the buyer’s costs.

Housing market development

Is there perhaps more perspective in the near future? The Nederlandsche Bank and ABN AMRO expect house prices to fall by 6% in 2023. Rabobank and ING expect a 3% decline on average. A further decline is also expected in 2024. The causes are mainly high mortgage interest rates and lower disposable income due to inflation. A rise in mortgage interest rates obviously also affects the affordability of owner-occupied homes. A further increase in mortgage interest rates will reduce house prices, but this is due to lower affordability from the demand side. Adding to this are ongoing problems in the construction industry, which means that new home construction continues to lag behind demand. There is no imminent improvement in this area. So in the short term, the housing market does not seem to be developing more positively, especially for first-time buyers.

Conclusion

So it is quite a job for the average recent graduate to secure a house to buy. With only a mortgage, this is virtually impossible. Nor is this going to get much better in the short term. That the majority of students think the housing market is doing badly is justified. Without accumulated wealth, or wealthy parents willing to step in, it looks like a mission impossible.