According to the De Nederlandsche Bank (DNB) as of 2013 a quarter of Amsterdam houses is being paid for in cash. What also stands out is that bought houses with a mortgage large amounts of private equity have been used. Are we dealing with wealthy individuals here or do investors see Amsterdam as the holy grail?
Buying house requires equity. With sufficient income one can finance the entire buying price, but additional costs require a contribution out of your private equity in most cases. However, equity is more and more indispensable when it comes to financing a house. Starters on the labour market usually don’t have sufficient income for buying a house in Amsterdam. With private equity to bring in there are more options.
Bringing in 50.000 euros or more in private equity
DNB research shows that amounts of 50.000 to 75.000 private equity aren’t unusual. In most cases those will be gifts to give children the chance to buy a house. Especially when you see how Amsterdam house prices have developed, investing in Amsterdam real estate has proven to be a good investment, both for the short- and long term.
How much money can you transfer to your children as a gift?
Parents can provide their children with a tax free gift of € 5.320,- per year. A much broader exemption is applicable when the money is used to buy an own house. It can be used for an actual purchase of a house, but the gift can also be used for a renovation or paying off on the mortgage. This exemption adds up to € 100.000,-. The government choose a high level of exemption to give the housing market a new boost. No need for that in Amsterdam anymore, but now the extra money is needed to successfully finance the new object. It has been calculated that the last few years total gifts for investing in a new house have added up to more than 10 billion euros.
Make sure you have cash money available before entering the housing market. Fully financing the property, together with additional costs, isn’t possible anymore.
Investors have discovered Amsterdam as well
Since 2013 a quarter of the houses are bought without a mortgage in our capital city. Most of the time those are (private) investors. Investors benefit in two ways. First the rise in value of the object itself. In 2016 house prices in Amsterdam have gone up with more than 20 percent. See if you can make that kind of return on the stock exchange! Second, you can rent your house for a high fee. There is a housing shortage in the city, so high rental prices are being asked.
The return on investment is best explained with an example
You buy a house in Amsterdam as an investment, with the total investment being € 300.000,-. Appraisal costs, notary costs and the purchasing realtor’s fee are included. The object itself has a price of € 285.000,-. There is enough demand for living space in Amsterdam, so you can ask a fair rental price. You set the fee on € 1.500,- a month.
If we leave out the other costs you make during the year and calculate an increase in value of 20% you will have the following return on your investment that year.
Rent: € 18.000,-
Value increase of the house: 20% x € 285.000,- = € 57.000,-
Total: € 75.000,-
This is a 25% return on your investment. Of course, when calculating fixed and variable costs the return comes out a bit lower than that. Furthermore, a 20% value increase is more than the expected average value increase.
Buying your dream house or investment in Amsterdam is an interesting option. We make sure this is done in a professional and successful manner. Welcome to Aankoopmakelaar Amsterdam.
