House prices increased during the latest quarter (Q3) by 1.07% (0.32% in real terms).
During the year to end-September 2013 the prices of existing homes sold in Netherlands fell by 4.05%, the lowest annual decline seen in 18 months, according to Statistics Netherlands (CBS). However when adjusted for inflation, house prices in the country dropped by 6.36% over the same period.
Almost all cities and municipalities in the country have seen their house prices falls decelerating during the year to end-Q3 2013.
- In Amsterdam, the price of existing homes dropped by 3.4%, the lowest annual decline for seven consecutive quarters.
- In Rotterdam, house prices fell by 3.2%, after registering annual declines of 8.2%, 7.9%, and 4.9% in the previous three quarters.
- In Gronigen, the price index of existing homes dropped by 4.1% y-o-y in Q3 2013, below the annual decline of 7% in a year earlier.
- In Zuid-Holland, house prices fell by 4.1% during the year to Q3 2013, down from a drop of 8.4% in the previous year.
- In Noord-Brabant, the price index of existing homes fell by 5.3%, down from an annual decline of 9.2% in a year earlier.
The deceleration in house price falls is supported by figures released by the Dutch Association of Real Estate Agents (NVM). The average house price in the Netherlands dropped by just 2.25% (-4.87% in real terms) to €204,600 during the year ending in Q3 2013. On a quarterly basis, house prices fell by 0.97% (-1.52 in real terms).
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 3.6% (-6% in real terms)
- In 2012, house prices fell by 7% (-9.5% in real terms)
Demand is rising again. In Q3 2013, the total number of property transactions rose by 25.9% to 28,925 units from the same period last year, according to the according to Statistics Netherlands (CBS).
In September 2013, the total amount of loans granted for house purchase to Dutch households rose by a meagre 0.6% to €543.55 billion from the same period last year.
“House prices will stabilize in the near future and will eventually start rising moderately,” said Hans Stegeman of Rabobank Groep, the Netherlands’s biggest mortgage lender. “The market may stabilize and recover from 2015 or 2014 at the earliest,” Stegeman added.
The Dutch economy is expected to contract by 1.25% in 2013 before registering a meagre growth of 0.5% in 2014, after a decline of 1.25% in 2012 and growth of 0.95% in 2011, according to the CBP Netherlands Bureau for Economic Policy Analysis.
Analysis of Netherlands Residential Property Market »
During the year to July 2013, rental yields from apartments in Amsterdam rose from:
- 50 sq. m. apartments: 5.37% to 6.24%
- 85 sq. m. apartments: 5.12% to 6.00%
- 120 sq. m. apartments: 5.11% to 5.68%
- 200 sq. m. apartments: 4.72% to 5.41%
During the same time period, rental yields from apartments in The Hague rose from:
- 120 sq. m. apartments: 5.91% to 6.68%
- 200 sq. m. apartments: 5.26% to 6.89%.
The increase in the rental return is because prices per square metre (sq. m.) have dropped both in Amsterdam and in The Hague.
During the year to July 2013, average prices per sq. m. of apartments in Amsterdam fell by 14% whereas in The Hague, average prices per sq. m. fell by around 17%, based on our sample (which may be untypical).
Rental incomes from apartments have also dropped but not as much as the drop in the buying price per sq. m. In Amsterdam, average rents per sq. m. dropped by only 1% during the year to July 2013, whereas in The Hague, average rents per sq. m. dropped by only 0.7%%.
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 3.7%, 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 growth of 1.5% in 2010, and 0.95% in 2011.
However, the Netherlands again entered recession in Q4 2011, with the economy shrinking by 1.25% in 2012.
The Dutch economy is expected to contract by another 1.25% in 2013, but will grow feebly by 0.5% in 2014, according to the CBP Netherlands Bureau for Economic Policy Analysis.
"Domestic demand is expected to remain weak in the remainder of 2013, as budget consolidation, pension cuts and negative wealth effects, predominantly emanating from the housing market, continue to pose a drag on the economy," the European Commission said.
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 2.9% 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.
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. In 2012, the national debt rose further to about 71% of GDP, far higher than the permissible upper limit of 60% stipulated by the EU Stability Pact.
The Netherlands’ budget deficit is expected to stand at about 3.2% of GDP in 2013. The government plans to implement €6 billion in austerity measures in 2014, which is equivalent to about 1% of the country’s GDP. This is on top of a four-year, €16 billion austerity package approved in November 2012 when Prime Minister Mark Rutte took office.
Unemployment continues to rise. In 2013 unemployment is projected to rise to 7.1%, according to the International Monetary Fund (IMF), up from an average of 3.46% from 2007 to 2009. The country’s seasonally-adjusted unemployment rate stood at 8.6% in August 2013.
In September 2013 inflation fell to 2.4%, down from 3.2% in June 2013, according CBS.
The conservative government of PM Mark Rutte (People’s Party for Freedom and Democracy-VVD) collapsed last April 19, 2012, after failing to agree austerity measures with its right wing political ally, the Freedom party of euro-skeptic Geert Wilders.
The VVD again won the highest number of seats in the election of September 2012. Mr. Rutte remained Prime Minister, promising budget cuts of €16 billion (US$20 billion) to bring the country’s deficit in line with EU rules.