The Dutch Property Market.

[Red Baron]

As a regular poster to this forum I have been consistent in my view that a significant downwards correction in UK propery prices is inevitable. Bust always follows Boom in the property market wherever it is in the World.

There is one exception however - the property market in the Netherlands which rose very strongly until 2001. Although the market has gone sideways ever since prices have not dropped, even though their economy is in recession.

Can anyone explain why the Dutch model should be different to the UK?

Dr Bubb?

[large]

What were the prices in 2001 versus long term trend? What were the prices compared to average salary? Had there been the same kind of bubble speculation? If the dutch market wasn't a genuine bubble, then that would be the reason.

[newbie]

As a regular poster to this forum I have been consistent in my view that a significant downwards correction in UK propery prices is inevitable. Bust always follows Boom in the property market wherever it is in the World.

There is one exception however - the property market in the Netherlands which rose very strongly until 2001. Although the market has gone sideways ever since prices have not dropped, even though their economy is in recession.

Can anyone explain why the Dutch model should be different to the UK? 

Dr Bubb?

<{POST_SNAPBACK}>

They peaked too early. The world wide real estate boom has helped them to acheive stagnation rather than a crash.

By analogy one could assume that the UK will stagnate if the boom continues in other parts of the world. But do you think that's very likely? I think it's raced ahead of fundamentals everywhere (to varying degrees) and will come down everywhere (to varying degrees).

[homedaq]

The dutch still get a massive tax break for mortgage interest relief. I recall it was about 45% of my gross monthly payment which is why multiples 6-7 years ago of salary were 6-8 times I think Please correctme if I am wrong, Amsterdam took a toll on my memory

I don't see why it should be so different however, from the last time I took an active interest, the threat of a reduction in this mortgage relief as the economy slowed down has kept things cool.

I also think that building regulations are much tougher there so with significantly fewer new builds, demand is always likely to be high enough to prevent a major crash. I think the govt was working on relaxing these regulations.

EDIT: Also, as my memeory returns, it is much more expensive to buy property in the Netherlands in terms on taxes and duty, usually coming in around 10% of the agreed purchase price. Perhaps that leads to less speculative purchases?

And you have to have an HIV test to get mortgage, but what that has got to do with anything I don't know. In fact I had to have two as if you borrow over a certain amount, you have to go for the "super" medical.

Edited June 29, 2005 by homedaq

[MarkG]

There's an article here that Google found which I briefly skimmed through:

http://www.enhr2004.org/files/papers/boelhouwer,%2520P.pdf

One claim that article made is that 35% of housing in the Netherlands is 'social housing' (presumably welfare housing?), so that's a big chunk of the market which is subsidised by the government.

[Graeme]

The Dutch get a tax break on their primary residence. I don't know the details, but the upper tax bands are around 50%, so it could be quite a discount.

Anecdotally, prices haven't come down except at the top end, and even then not by much, even against the backdrop of a recession. A friend of mine over there was out of work for some time, and I think that he's at a senior level.

I also saw a reference to some research that had shown that over something like 300 or 400 years, the average price of a house on the Herengracht had risen by 0.2% or 0.4% per year over inflation. Which suggests that they're not as good long term investments as are sometimes claimed.

[Waitingforthesun]

They peaked too early.  The world wide real estate boom has helped them to acheive stagnation rather than a crash.

<{POST_SNAPBACK}>

I hope you are right. Price stagnation of the Dutch real estate market is the only example of soft-landing (bubble deflating instead of bursting) I have heard about.

Dutch market may have been supported by the low rate policy of ECB (that is to say, in terms of affordability prices are lower in 2005 than in 2000, where rates were relatively high)

I remember some friends who bought in Amsterdam in 2000, I warned them it could be dangerous because prices had increased too fast - they laughed and answered: "real estate price can never fall"

They sold their appartement in 2001 with a small gain, but no loss. Good luck for them.

But if I were a Dutch wannabe-FTB I would be very disaponted, facing 4 years of price stagnation (but no fall) AND rising unemployement (something new for Netherland)

[zzg113]

Can anyone explain why the Dutch model should be different to the UK?

A ) Their interest rate is 2%. Look at house prices in Ireland. When money is cheap (actually it's free in real terms, as inflation in both countries is above 2%) house prices go crazy.

B ) As other posters have mentioned, Dutch homeowners still get massive tax relief on their mortgage repayments (the Dutch equivalent of MIRAS), which incentivises people to buy.