Is outbidding on an owner-occupied home still necessary at the end of 2023?

In the nine months leading up to April 2023, the housing market showed a notable decline in prices. After that, prices rose by 2.8% and a house cost an average of €410,000. Those who bought a house in July, August or September spent an average of €422,000, an increase of 1.7%. Korné Pot, owner of Libero Aankoop, the largest purchasing agent in the Netherlands, is concerned that things are going in the wrong direction: “We see in the land registry data that all figures are increasing, including those for overbidding. Houses are no longer affordable, especially for ‘the unlucky generation’.”

Several factors play a role in the increase

The Dutch Cooperative Association of Real Estate Agents and Valuers (NVM) indicates that there are several reasons for the rising sales prices. First of all, the declining housing supply coupled with increasing demand is causing price pressure. In addition, sharply rising wages also play a role. This allows people to borrow more, which leads to partial compensation for rising interest rates and inflation. “The number of inhabitants per house is also declining,” Pot adds. “Families are getting smaller and the number of divorces is increasing. We have more residents than ever, but families are smaller than ever. That means we need more houses. This is currently about 400,000 too few. Political decisions such as the decreasing number of permits being granted and migration also play a role.”

More often outbid

Pot points out that there is currently more and more outbidding: “A few months ago it turned out that in 25% of cases there really had to be outbid. That percentage has now changed to 35%.” He indicates that it is easy to predict when overbidding is necessary to actually acquire the home. For example, it is advisable to increase the bid for homes that have only been for sale for a short time and for which there is a lot of interest. Houses in popular locations also require a higher offer than the asking price. And although there is often room for negotiation on DIY homes, you cannot avoid overbidding on homes that are completely ‘finished’. “Those ‘VT living-like houses’, with perfect furnishings,” Pot jokes.

According to the real estate agent, the price range and region of a home play a role in overbidding. “The competition for affordable housing for starters is so high that there is almost always outbidding. If you choose a home in the province for less than €500,000, it is now rare to be outbid. In Amsterdam that limit is more like €700,000,” Pot explains.

The art of the dual bid

At Pots real estate agency, a lot of work is currently being done on making a ‘dual offer’. An offer is made where you offer the seller two options: a higher offer with the reservation of financing, or a lower offer without the reservation of financing. “One seller wants certainty that the sale will go through, while the other chooses the highest amount. It is and remains a gamble as to which of the two options the seller is looking for, because real estate agents do not reveal this. With a dual bid you increase your chance of ‘hitting the mark’,” says Pot.

And according to him, the fact that a lot of success is achieved through a dual bid is reflected in practice. “It works fantastic. Of course, it depends on the customer’s profile whether we advise them to overbid, but if you really want to own a home, you actually have to do it nowadays.”

Future

Pot finds it difficult to make statements about the near future of the housing market: “The housing market cannot be predicted. In 2020, all the experts said that the housing market was going to collapse, but prices had never risen as fast as then. However, you would say that at a certain point the increase in prices can no longer continue.” In any case, what he advises buyers to do is: buy if possible, provided you want to live there for more than 5 years. “At least then you still build value.”