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Wednesday, 11 April 2012

Bulls could call me a permabear, but the situation in The Netherlands IS deteriorating. Macro data from the Central Bureau of Statistics

During the last two days, the Dutch Central Bureau of Statistics reported some macro-data on the Dutch that are tell-tale signals of the fact that the credit crisis in The Netherlands is rather gaining momentum, than that it is softening.

One of the main causes for the credit crisis gaining momentum, is the desperate situation at the Dutch housing (RRE) and Commercial Real Estate market and the fact that nobody in the PM Mark Rutte-cabinet, the Second Chamber or the special interest associations for real estate dares to do something structural about it.

  • People that want to buy a new house, often can’t because it is much too expensive and the banks won’t lend them the money needed for it. 
  • People that have an excess mortgage (or even two) want to sell their house, but can’t as the market doesn’t want to pay their salesprice. Lowering their price is impossible, as they get stuck with a residual debt then. 
  • People don’t consume anymore, as too much money is locked up in excess mortgages and in savings for (redemption of) current/new mortgages. Jobless and poor tenants already have a hard time to cough up the rent. 
  • This will change for the worse, as the government wants to force people in private houses, by substantially raising the rent for people that earn too much for their social rental house. This arrangement, although not unreasonable won’t miss its effect on the financial situation of tenants. 
  • The fair value of houses in the mortgage portfolios of banks is currently much lower than the amounts that banks have in their books for them. Banks don’t want to write-off on these book values, as this would jeopardize their precarious solvability position and would force them to ask even higher risk premiums of their mortgagors. 
  • Forced selling of a house of someone in arrears will lead to a substantial write-off on book value; this makes banks very reluctant about this. 
  • Commercial Real Estate is in a dire situation with high structural vacancy (10+%) and even higher non-structural vacancy (15+%). 
  • Shopping streets and shopping malls are suffering from more and more vacant stores. Still almost every shopping street and shopping mall looks the same with the same boring stores and the same ugly design. 
  • Still municipalities keep developing new shopping malls that cannibalize other shopping malls and streets in the already overcrowded cities (as far as shopping space is concerned). 
  • Municipalities keep also developing new industry zones/commercial zones and new commercial real estate, in spite of the ruining effect on the landscape and city-structure and the upclimbing structural vacancy. 
  • Municipalities have to do so, as loads of money are invested in dearly paid building ground that would otherwise be worthless. 
  • The financial situation of some municipalities is dire, as they took too much risk with building ground speculation and real estate development.

CRE and RRE in The Netherlands have thus turned in a festering wound that makes the patient sicker and sicker, while the doctors look the other way.

Here is the CBS macrodata:

  • Number of building permits issued in 2011 down by 9%
  • Lowest number of building permits since 1953
  • Downturn in latter half of 2011
  • Number of new dwellings finished in 2011 marginally up
Last year, 56,000 building permits were issued for new residential units, i.e. 9% fewer than in 2010 and the lowest number since 1953. The number of newly finished dwelling units increased by 3% according to the latest figures released by Statistics Netherlands.

The number of building permits issued in the first six months of 2011 grew by 6% relative to the same period one year previously. In the latter half of last year the situation deteriorated. The number of building permits issued during that period slumped by 19%. The number of building permits issued for owner and tenant-occupied houses declined.

Nearly 58,000 new houses were finished in 2011, a growth by 3%. The number of owner as well as tenant-occupied dwelling units finished in 2011 increased modestly.
The government, housing corporations and private initiatives accounted for the increase in new owner-occupied residential units finished last year. The number of residential units built by commercial builders, like project developers, was approximately the same as in 2010.

Please don’t see the last paragraph as growth and thus as a signal that the Dutch housing market is returning to normal. It isn’t. These are building initiatives that were already started in the past and that just needed to be finished. But you can ask yourself: who will occupy these houses?

Dutch manufacturers realised a turnover growth of 1.5 percent in February 2012 compared to twelve months previously. In January, growth was over 8 percent. February’s turnover growth was generated exclusively on the domestic market; domestic sales were 3.5 percent up from one year previously. For the first time in more than two years, there was no turnover growth on the export market.

The working-day and holiday pattern was more favourable in February 2012 than in February 2011. The positive effect on sales is estimated at approximately 2 percent. Prices of manufactured products were nearly 5 percent higher than one year previously.

The sector petroleum, chemical, rubber and plastic products recorded the highest turnover growth (+ 10.5 percent), but the growth was entirely attributable to higher prices. Sales in the sector electrical engineering and machinery and transport equipment slumped by 12 and 9 percent respectively.

1 Manufacturing turnover
Source: CBS (
Click to enlarge
Optimists could read the first paragraph of this article as a statement, speaking of 3.5% domestic growth. Wowsers!

Realistic people that read the second paragraph too see that the so-called growth is totally evaporated by 5% higher prices y-o-y and the effects of the intercalary day on February 29th. In reality, there is a contraction of about 3.5% in sales numbers. There goes your growth.

That this is not just fuzzy calculation of mine is proven by the next item of CBS:

The average daily output generated by Dutch manufacturing industry was down by over 3 percent in February 2012 from February 2011. In January, manufacturing output was down by more than 1 percent on one year previously.

Output fell across all sectors of manufacturing industry. Output in the sector transport equipment and the sector food, drinks and tobacco declined by approximately 5 percent.

The cold weather in February affected the construction sector and as a result the output of wood products and construction materials dropped significantly by 22 percent.

2 Manufacturing output (volume)
Source: CBS (
Click to enlarge
The actual consumption and thus the production of goods is indeed declining. Higher prices as a consequence of more expensive raw materials cover up this picture, leading to a false sense of domestic growth. But there is not growth and there won’t be growth either in the coming months.

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