Earlier this year, Joost van Egmond (62) signed up for a new build flat in Arnhem with a low interest rate, good price and good CV stability – which comes in handy given his health issues as life in his current home is becoming increasingly difficult.

However, approval for the project has since been delayed and the mortgage offer is about to expire. So Van Egmond has to take out a new mortgage at the current, much higher interest rate, making the house significantly more expensive. The contractor can also leave the construction if the permit is delayed too late. In short, the problems are piling up.

Van Egmond isn’t the only one struggling to find a new home. Interest rates are rising, making buyers doubt. Sellers are getting nervous because house prices are falling and those who have to build the houses are faced with expensive raw materials and a shortage of construction workers. Is the flagging housing market at a turning point?

Coen van Rooyen, managing director of the housing association WoningBouwersNL, speaks of a “special situation”. He wrote a report on the current state of the housing market and predicts that new construction will shrink significantly in 2023. “There is an acute demand for housing now and it will only increase. That there are now so many problems on the road making this process difficult is something very special.”

This is partly due to rising mortgage interest rates, explains economist Mathijs Bouman. “It’s gone back to ‘normal’ levels, 4 to 5 percent. But house prices are still from the days when interest rates were much lower.”

According to Bouman, there are now two movements. “Because of these mortgage rates, new builds can no longer actually be paid for, so builders are slowing down. In existing buildings, you don’t see the effect in the number of houses, but in the house prices – they are starting to fall significantly.”

Van Rooyen describes the situation in the new building as one perfect storm. As an example, he cites the The Grace project in The Hague, two towers with 1,400 new apartments, of which the sole investor has now decided not to sign for the time being. Expensive building materials and Hugo de Jonge’s big regulatory plans on the rental market make the investor doubt whether he can generate a sufficient return.

“Higher interest rates, more expensive building materials, more expensive energy, a shortage of construction workers, municipalities that aren’t suddenly asking less money for the land,” Bouman sums up. “At the same time, there are customers who pay less than the initial idea. If you sum that up, you can speak of one perfect storm.”

While new buildings are becoming more expensive, existing buildings are becoming cheaper for the first time in years. This is an additional problem for home seekers like Joost van Egmond. “We have already spent more than EUR 17,000 extra on new construction in Arnhem due to the increase in mortgage interest rates, while our current house has yet to be sold. The price that we have in mind for it will probably be around forty to 50,000 euros less, according to the agent.”

High material costs

The war in Ukraine also plays a major role in the real estate crisis. Before the outbreak of war, Albert Adema, director of the De Vries construction company, signed the contract for the construction of a villa in Leeuwarden. Since then, material costs have skyrocketed.

The prices for insulating glass, mortar, reinforcing steel and plastic pipes have recently increased by several tens of percent. “It’s all about the materials that require a lot of energy to produce,” says Adema. As a result, he sees his margins dwindle, is in the red on some projects and is therefore very reluctant to take on new projects while the market is crying out for new homes.

The housing shortage has remained, but a lot of security for the builders is gone, says Adema. “The number of applications from the private sector in particular is enormous, but the question is how to proceed. The last time the situation was so uncertain was during the financial crisis.”