Housing Bubble Deflated
THE HAGUE, 18/06/13 - House prices in the Netherlands have fallen to the level of its immediately neighbouring countries due to the crisis. Only in the UK are prices still higher, according to a survey by Het Financieele Dagblad.
Home-buyers have for a long time had to pay much more in the Netherlands than in Germany and Belgium. Since the top of the market in 2008, prices in the Netherlands have however fallen by nearly one-fifth to average 215,000 euros. This is about the same level as in Germany and Belgium, where prices actually rose by around 10 percent in the same period.
House prices in the UK have recovered due to the very loose monetary policy and now lie well above the previous high. The average UK home now costs the equivalent of 276,000 euros, while the average price outside London is at 244,000 euros.
According to housing market economist Paul de Vries of Rabobank, Dutch housing prices rose faster in the 1990s than in other countries as a result of the introduction of redemption-free or perpetual mortgages. “Now that we are again abolishing these forms of mortgage, lending capacity and hence housing prices are falling.”
Market conditions vary widely by country. “The quality of the homes, the height of mortgage interest rates and fiscal deductibility are not the same everywhere,” says Harry van der Heijden of the University of Delft. "Prices also sometimes diverge more within countries than in the Netherlands.”
For example, homes immediately over the border in Germany are still substantially cheaper than in east Netherlands. But in cities like Frankfurt and Munich, the value of homes is actually above the level of those in Amsterdam and Utrecht.
The central bank (DNB) forecast last week that the decline on the Dutch housing market will not bottom out until 2015. By around this time, prices will be nearly 10 percent below the currently level, DNB predicts. An average home will then cost 195,000 euros, slightly below the average level of homes in Germany at the moment of 200,000 euros.