It’s been a while ago since I last wrote on the Dutch
housing market. Since then there has been a dramatic change in The Netherlands,
although it is not clear what the direction of this change eventually will be.
The elections of Wednesday, 12 September, for
the Dutch 2nd Chamber of parliament showed a clear victory for the liberal-conservative party
VVD of PM Mark Rutte (41/150 seats) and the Dutch labor party PvdA (38/150
seats).
All other parties ended up with clearly fewer seats and the
disappointment among especially the socialist SP, the right-wing PVV of Geert
Wilders and the Christian-Democrat party CDA was big, as all three lost many
seats when compared to respectively the latest prognoses (PVV, SP) and the
latest elections (CDA).
Although the VVD was the clear winner of the elections, the
voter made a second stint of the dreary and lackluster cabinet VVD-CDA(-PVV), aka Rutte I, de
facto impossible as all three parties combined are still lightyears away from the
required 76 seats in the 2nd Chamber. That is the good news.
The bad news is: with the VVD in a new government, it is
still implausible that structural policy changes are applied to the Dutch housing market and especially the Mortgage
Interest Deductability (MID), that – together with the extremely low interest of the
last 15 years – created a housing bubble of epic proportions in The Netherlands.
The consumer trust at the Dutch housing market seems slowly recovering. The market indicator of the home-owners
association Vereniging Eigen Huis (VEH) and the Delft Technical University rose
to 57 points in August. In June and July the indicator didn’t exceed 54 and 53
points respectively. Slightly better, but still extremely low when compared to
the 90 points of summer, 2007.
VEH-housing consultant
Bob Maas states that more potential house-buyers now understand that a low
mortgage interest has a positive effect on the housing supply. ‘They feel it is
now time to strike in order to avoid political decisions on reduction of the
MID’.
It were people like Bob Maas that made me start my blog. The
man is clearly clueless: the Dutch housing prices are still skyhigh, due to the relatively
low mortgage interest rate and the MID.
Since the moment of peak
housing prices, the housing prices didn’t drop by much
more than 10-15%, while the government failed to run the gauntlet concerning
the Dutch housing market.
The result is that the Dutch housing market is still firmly locked. Wise people that can afford to wait, should wait
until the housing prices dropped further, unless they really need their desired new house and can easily afford to buy it.
Almost 5% of the
houses in The Netherlands is vacant, according to the Central Bureau of
Statistics.
Totalled up, 375,000
of the 7.2 million houses in The Netherlands is vacant. With 75,000 of the
houses, this vacancy is caused by usage of the house as a practice, studio or second
house. The rest is really vacant.
Over 15% of the vacant
houses is built after 2000. Two-third of all vacant homes is a rental house.
According to the CBS it is improbable that vacancy will increase in the coming
years, as the supply of newly-built houses has dropped, while the number of
households has increased at the same time.
So far for Bob Maas: 300,000 houses are really vacant of
which 100,000 owner-occupied houses. Many older rental houses are vacant,
because of renovation or demolition, but that is not true for the vacant
owner-occupied houses.
If the housing market would be on its way to recovery, you
would expect this number to drop, taking into consideration that the number of
newly-built houses dropped sharply. Instead, the number of vacant houses is
stable over the last two years.
And what to think of the 15% vacant houses that
have been built after 2000; there is clearly something wrong with these houses.
Either these houses are too expensive, not suitable for the distinct groups of people looking for
a house or in a impopular neighborhood. Summarized, the problems are far from
over and the vacancy is there to prove it.
Less
houses and mortgages sold in August 2012 in The Netherlands Y-o-Y; M-o-m sales shows
a slight improvement (source: www.kadaster.nl)
This is to rub it in once more.
Year-on-year sales of
houses in August 2012 dropped by 16.2%: to 8,384 sold houses from 10,009 in 2011M08. Month-on-month sales increased by 12.5% from 7,451 houses.
The number of
registered mortgages in August dropped by 24.3% y-o-y: to 14,446 from 19,082 in 2011M08. M-o-m,
there is a drop of 0.5%.
The m-o-m sales data show indeed a slight improvement that
could be caused by the effect that Bob Maas earlier described. However, compared to the
y-o-y drop, this monthly increase is peanuts and I’m sure that the (seasonal) effect will
be short-lived. The drop in mortgage sales by 0.5% m-o-m shows too that everything
is not hunky-dory yet in the Dutch housing market.
The number of houses
that has been foreclosed, has soared y-o-y by 18.1%: to 170 from 144. The
increasing number is remarkable as protests against foreclosures have been mounting.
The auctions would not be executed fairly in general, which leads to higher
residual debts for the former owner than deemed necessary.
On a total housing stock of 7.2 million houses, the number
of 170 foreclosures is still extremely low. This is not so much a sign of health of the
Dutch housing market, as it is that foreclosure is a step-of-last-resort that
all parties (homeowners, realtors and banks) desperately avoid.
One of the reasons for this evasive behavior is that the
Dutch SIFI (systemically important financial institution)-banks (ABN Amro, ING bank
and Rabobank) absolutely not want that the true value of the Dutch housing
stock will get at their balance sheet, knowing that many mortgages will be underwater in many years to come.
The banks rather kick the can down the road for some extra months,
while hoping for a miracle. A miracle that won’t come.
For more than 10,000
hectares (24,711 acres) of community-owned building ground, there is hardly any demand from the
owners, according to an investigation executed by the Kadaster and engineering agency
DHV. For the whole country, the municipal ground reserves have been compared to the CRE
and RRE (commercial/residential real estate) demand until 2025. The excess ground represents a value of €1.1
bln.
Municipal
ground-owning companies are in dire straits currently. A lot of ground has been
bought during the last 20 years. As a consequence of the economic crisis and
the stalled housing market, these supplies weigh heavily on the municipal
balances. Losses are huge: varying from €2.9 bln (Deloitte) to €3.2 bln
(Professional council Municipal Finances) for all Dutch communities.
The CRE/RRE crisis made
the problems at the ground-owning companies visible and reinforced these
effects. The Dutch housing market is locked, there is an excess of
industrial/commercial zones and (structural) vacancy on the CRE-market is still
mounting.
Inquiring minds that speak Dutch or use a good translator, read the whole report, as this is a must-read document. Even if the real estate
crisis and the economic crisis would not have happened, the kamikaze behavior
of communities concerning ground-ownership and the development of excess industrial/commercial
zones would have led to the current anyway, albeit a few years later.
The crisis sped up the process, but didn’t
cause it. The communities themselves caused it. Unfortunately the Dutch municipal
tax-payers (we all are) must foot the bill for this erratic behavior.
Summarized, it puzzles me that the Dutch home-owners are
slightly less pessimistic, but I’m happy about it. To be honest, they don’t have
a good reason to be this optimistic, in my humble opinion.
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