Real estate market news, current affairs - November 2022
Another summary with the latest news and current events.
What changes does the real estate market face in the near future?
Increase in the central bank base rate: The central bank base rate rose to 11.75% at the end of August. From the point of view of taking out a loan, the important information is that the bank can obtain financing for an amount equal to the base interest rate - and the specific financial institution's own profit is added to this. The brutal increase in the central bank's base interest rate has not yet had its full effect. Many banks use pre-funded assets, which is why they can (for now) provide a loan with an interest rate of 8-9%, which is considered favorable. Despite this, far fewer people are taking advantage of the loan option, and interest in loans has dropped sharply. Now there are more buyers on the market who can realize their housing goals with cash, or who only need a loan of a minimal amount. Those who want to buy a house or apartment with a loan postpone the purchase. Sooner or later, all of this leaves its mark on the market. It can be expected that the number of transactions, and thus the demand, will shrink. An interesting question is whether all this will result in a price drop? It all depends on how the supply-demand balance will develop in the future.
Utility reduction: With the unexpected announcement of utility reduction, people have started to become more aware. In the eyes of the customers, the energy aspects have been greatly appreciated. Modern, insulated houses equipped with solar panels are the "winners" of the energy crisis. As a result of the uncertainty due to energy prices, it is more difficult and slower for customers to make decisions and choose better. Properties with outdated energy systems will be at a serious disadvantage, as demand for them is expected to decrease. All of this may slowly - expectedly from the end of the year - lead to a drop in prices.
Huge changes in the sublet market: The reduction in utilities has greatly increased the cost of living. In addition to high rents, many will simply be unable to pay the bills. Demand is likely to decrease and owners will be forced to lower prices. A significant part of the subletting market is made up of young people, who are supported by their parents from home. If the family has to pay multiple times the previous price for heating, it is feared that they will no longer have enough financial resources to finance the child's sublet. In the past period, the gap has opened wider and wider, the ideas of tenants and owners have become light years apart. We are talking about a difference of around 20%, which is already having a strong impact. A few months ago, the owners were still able to choose between the tenants, but this has changed. It is possible that rents will need to be reconsidered, as the market has become extremely price sensitive. Fortunately, there is still a group of people who can pay for high-quality sublets. It is necessary to become much more conscious when renting out apartments and focus on quality. The proper preparation of the property - for example clean painting, modern furniture in good condition - takes a lot of effort. If this does not happen, the apartment can only be rented out at a lower price.
State subsidies - the continuation of the green loan is on the horizon (?)
There is nothing new under the sun regarding state subsidies - at least, no official announcement has been made. However, a stray news surfaced, according to which the 3rd phase of the Green Home Program could start next year. I don't have specific information about the details yet, but it is certain that you will be able to get a loan on more favorable terms than the market loan. If this is actually realized, it is expected to give a serious impetus to the market of newly built real estate, and many people will bring forward the date of purchase. It is also possible that the renewed Green Home Program aims at the energetic modernization of existing properties, which would otherwise be greatly needed.
The correct determination of the selling price has become more important than anything else
The market is extremely price sensitive - this is why it is difficult for anyone who wants to accurately estimate the value of the property they want to sell. There is a demand for houses and apartments in a state of renovation, but the process is still slow, and longer sales times must be expected. Customers are often unsure of how long the renovation will take, whether it is worth it at all, and whether there will be labor and raw materials. If you are thinking about selling, I recommend that the price be competitive, so that you have more potential buyers, than that the sale drags on for a long time. Because in this case, due to the continuous, multiple price reductions forced by the market, it can easily happen that the property is sold well below the price.
Selling plots has not become easier
As a consequence of the extension of the reduced 5% housing VAT, it was expected that the demand for plots would increase. However, based on my personal experience so far, this has not happened. There is still extremely little interest in construction plots from both private individuals and investors. Due to the uncertainty caused by the volatile economic situation, waiting is the norm here as well, people are reluctant to embark on such a large-scale project. If you were to sell a plot of land, you also have to expect a longer sales time. In addition to determining the realistic price, the characteristics of the plot are also important (for example, how can it be built, is there a building waiting to be demolished in the area...etc.).
What does the future bring?
This year - unless there is another dramatic announcement by the government - the market will remain stable. High-quality, well-equipped real estate is clearly in short supply, which is why such houses and apartments sell out in seconds. The country will be divided into several parts: in some areas, even a price increase can be predicted, while in others, a decrease in demand may result in a price decrease. A drop in price is almost certain to be expected for properties with an outdated energetic classification. In my opinion, as long as there is solvent demand, the situation will not change significantly. So far, the segment that has to pay extremely large installments with a high loan has not yet appeared on the market. What could cause serious trouble is if the unemployment rate rises drastically.