House price growth virtually ground to a halt in 2008 as the market continued to slow and there were tentative signs of falling prices in the last months of the year. According to Kadaster data, prices were up 1.6% in 4q 2008 on the previous year. Transactions data had shown more persistent weakness throughout the year, with a 13% fall in sales over the year to the third quarter1.
As elsewhere, mounting economic gloom took its toll and optimism that the Netherlands housing market would avoid falling prices, voiced amongst others by the central bank in its autumn financial statement, began to evaporate. Confidence in the housing market weakened significantly with the intensification of the worldwide credit crunch. The financial system was badly affected with the shock nationalisation in September of the Dutch part of Fortis Bank – which included Netherlands retail parts of the former ABN Amro Bank – and state injection of funds into other banks. These banks had been major mortgage lenders and mortgages have been far scarcer in the closing months of the year. Economic growth halted in the second half of 2008 and the country may well be in recession in 2009. The troubles of the world economy have not spared the Netherlands.
Falling interest rates may boost housing demand but this is unlikely to offset the general problems of the economy, declining consumer confidence and tightening lending criteria. What is more, the country has one of the highest mortgage to GDP ratios in the world and a quarter of recent mortgage lending has been funded via special purpose vehicles, so that constriction of capital market lending will continue to have significant effects.
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