The overheated housing market is getting hotter month by month, here in the Netherlands, with the latest reported increase in December 2021 of a whooping 20.4% more than a year before (already in a rising trend). It is the largest price increase since the start of this statistic in 1995.
But, together with this increase in pricing, it comes also that a lot of people are unable to afford housing anymore. Therefore the transactions are starting to decrease, in terms of volume:
According to The Netherlands’ Cadastre, the total number of transactions recorded over the month of December 2021 stood at 20,559. This is almost 22 percent lower than one year previously.
So less, but more expensive houses are changing hands.
And now we have the following situation: more and more people with reasonable good income cannot compete with the craziness of the market, and they are left out of the buying process. What remains is the rental market, but since this is already quite tight, the addition of the new possible clients (that cannot buy anymore) is just increasing pressure. And therefore, the rent is going up, at least in the so called private sector.
Some 574,000 households in the Netherlands live in a rental property costing more than €765 a month and six in 10 are paying more than a third of their net income in rent, the NHG says.
‘They earn too much for social housing but cannot buy a suitable property because of their income. So they are forced to rent a home which is often more expensive than a home of their own would cost.’ (NHG chairwoman Carla Muters)
Source: dutchnews.nl
And now the National Mortgage Guarantee (NHG) agency has the solution:
The scheme ... will help people who have been denied a mortgage even if they are paying more in rent than the monthly repayments would be.
That sounds a lot like a subprime mortgage situation, isn't it? People that cannot otherwise afford to buy a home, out of the sudden, then can. And that will lead to even more housing demand, which will result in an even bigger price increase, that will lead to even more people being left outside a possible transaction. It's like putting out a fire using gasoline.
For obvious reasons, the banks are happy with that:
ING, ABN Amro, BLG Wonen and Aegon are supporting the initiative, which will cover property costing up to the NHG limit of €355,000.
But still, nobody is noticing the elephant in the room. Prices are crazy from various reasons, but the most important are:
- mortgages are given away by the banks and other financial institutions way too easy (ECB negative interest rate has a huge saying in this)
- mortgages are covering almost 100% of the house, with basically no down-payment required
- people with some money in the bank are evading 6% (official) inflation number plus the negative interest rate (apply for now, to accounts over 100k) and are parking the money in this sort of asset
- the government is subsidizing big chunk of the mortgage interest rate
- etc
And the most direct solution: ECB (European Central Bank), exactly as the FED, needs to stop the crazy QE (printing trillions of euro out of the thin air) and raise the goddamn interest rate, to match at least the inflation rate. But this won't happen. Because if it does, countries like Spain, Portugal, Greece, Italy, will be erased by the real borrowing costs. And that will in the end destroy euro as a currency.
And we don't want that.
