The prices of existing homes sold in Netherlands fell by 6.76% during the year to end-November 2012, according to Statistics Netherlands (CBS). When adjusted for inflation, house prices in the country actually dropped by 9.14% over the same period.
During the year to November 2012:
- The price index of single-family dwellings fell by 6.6%.
- The price index of apartments plunged by 7.5%.
Almost all cities and municipalities in the country have seen their house prices falling in November 2012. Among the major cities, Amsterdam (-11.17%) and Apeldoorn (-9.66%) have seen the biggest house price falls, according to the CBS.
Dutch Association of Real Estate Agents (NVM) data suggests that the average house price in the Netherlands dropped by 9.21% (-11.43% in real terms) to €209,100 during the year ending in Q3 2012.
After a housing boom lasting almost 15 years, the Dutch housing market started to become weak in 2008, mainly due to the global financial meltdown.
- In 2008, house prices fell by 5.3% (-7.5% in real terms)
- In 2009, house prices dropped by 1.5% (-2.4% in real terms)
- In 2010, house prices rose slightly by 1% (-0.7% in real terms)
- In 2011, house prices dropped by 3.8% (-6.2% in real terms)
From January to November 2012, the total number of dwellings sold dropped by 7.2% to 99,897 units from the same period last year, according to CBS. From 2009 to 2011, average number of dwellings sold was less than 125,000 per year, down from an annual average of 200,300 from 2005 to 2008.
Dutch house prices are projected to continue falling in 2013, according to local property experts.
The Dutch economy entered recession in Q4 2011, when real GDP shrank by 0.6% both on a yearly and quarterly basis. The economy is expected to shrink by 1% in 2012 and by another 0.5% in 2013, based on estimates made by the Central Plan Bureau (CPB).
Analysis of Netherlands Residential Property Market »
Rental yields on The Hague apartments are moderate to good, ranging from 5.26% to 6.14%. In Amsterdam, rental yields range from 4.72% to 5.37%.
A 120 square metre (sq. m.) apartment located in the desirable neighborhoods of Amsterdam, i.e., Central Amsterdam, Oud Zuid including De Pijp and Vondelpark, returns gross rental yields of around 5.11%, whereas a 120 sq. m. apartment in The Hague’s desirable neighborhoods, i.e., Archipelbuurt , Scheveningen, Statenkwartier, Duinoord, Belgisch Park, Marlot, Benoordenhout and Willemspark, returns higher rental yield, at around 5.91%.
Smaller apartments tend to have higher rental yields than larger apartments. This is true for both Amsterdam and The Hague apartments. A 50 sq. m. apartment in Amsterdam returns gross rental yield at 5.37%, while a 200 sq. m. apartment returns only 4.72% rental yield. Moreover, in The Hague, 1 60 sq. m. apartment returns 6.14% rental yield, while a 200 sq. m. apartment returns only 5.26% rental yield.
Capital Gains: For the sale of real estate that was used as part of a rental business enterprise, capital gains are taxed as part of income in Box 3 i.e. 30%.
Inheritance: Wealth acquired by inheritance from an individual who has properties in the Netherlands is subject to inheritance tax. Different rates apply, depending on the relationship between the heir and the testator where there are three categories.
Residents: Residents are taxed on their worldwide income.
If the property is newly constructed (or less than two years old) the Transfer Tax is replaced with the 19% VAT.
Rent: Landlords can set the rent freely and adjust the rent, for properties above the ‘liberalization rent limit’ of €604.72 per month. A deposit of two to three months is customary.
Tenant Security: The most dangerous aspect for a landlord in the Netherlands is that once a property has been rented, tenants are almost impossible to evict. The basic Dutch rental contract is one of unlimited duration. Landlords can only give notice in strictly defined cases, and it is extremely difficult for owners to evict tenants once they are established.
After the global financial meltdown in 2009, the Netherlands’ GDP contracted by 3.5%, heavily affected by a 16.5% drop in exports, since two-thirds of the Netherlands’ economy relies on foreign trade. Then the economy recovered, registering real GDP growths of 1.6% in 2010 and 1.3% in 2011.
However, the Netherlands again entered recession in Q4 2011. The economy is expected to shrink by 1% in 2012 and by another 0.5% in 2013, according to the Central Plan Bureau (CPB), with consumption depressed amid falling house prices and government austerity measures.
The country experienced uninterrupted growth for 26 years from 1982 until 2008, with an unprecedented boom in the latter half of the 1990s. There was low inflation, strong exports and virtually no unemployment. The economy grew by an average of 2.8% annually from 2004 to 2007. But one legacy of the boom years was huge mortgage debt, which now stands at well over 100% of GDP, among the highest in the eurozone.
The debt burden means the outlook for the country’s banking system is negative, according to Moody’s Investors Service. “The structural weaknesses of banks in the country include household debt, high balance-sheet leverage and considerable reliance on market funding,” says Moodys.
"The main driver of our negative outlook on the Dutch banking system is the domestic operating environment, which will remain difficult for financial institutions. This reflects the currently weak macroeconomic conditions in the Netherlands and associated risks resulting from the high leverage of domestic households."
Unemployment is now rising. From an average of 3.46% from 2007 to 2009, the country’s unemployment rose to 4.46% in 2010 and 4.5% in 2011. In November 2012, the unemployment rate rose to 7%, according to Statistics Netherlands (CBS).
During the recession, the government boosted the economy through stimulus programs and bank bailouts, resulting in a budget deficit of 4.6% of GDP in 2009, 5.1% of GDP in 2010 and 4.8% in 2011. As a result, the country’s debt rose to 65.2% of GDP in 2011.
The conservative government of PM Mark Rutte (leader of the People’s Party for Freedom and Democracy-VVD) collapsed last April 19, 2012, over its failure to agree budget cuts and austerity measures with its right wing political ally, the Freedom party of euro-skeptic Geert Wilders. An early election was held last September 2012, in which the VVD again won the highest number of votes and seats, which means that Mr. Rutte was retained as Prime Minister. Prime Minister Mark Rutte promises budget cuts of €16 billion (US$20 billion) to bring the country’s deficit in line with EU rules.
The Netherlands’ budget deficit was estimated at 3.8% of GDP in 2012, according to the CPB. In 2013, the budget deficit is expected to be 3.5% of GDP, above its initial forecast of 2.7%, according to the Dutch National Bank.