View Full Version : Dutch vs German housing vs Bubble.

04-15-08, 05:09 PM
First signs of a Dutch housing crack-up are showing.
http://www.telegraaf.nl/binnenland/3758977/_Huizenprijs_duikelt_in_Amsterdam__.html?pageNumbe r=2
The Netherlands is one of the last countries left where mortgage intrest is deductable from income tax. Mortgages where available up to 110%, all family incomes where fully included, etc. The result was an enormous bubble.
A house bought in 98 for Eu 125.000 is doing now Eu 400000. A comparable house in Germany however did Eu 130.000 in 98 and is doing now 150.000. Why the difference.

The first reason I can think of is that German mortgages always where up to only approx 75%. Most mortgages only up to 60%. Second reason, Germans saw there houses never as an asset but always as a consumer good. So much for the average German good sense. Too bad various German state banks had to gamble in the US housing casino which left the average taxpayer with a big problem. Until now no signs of big Dutch losses in this area.

In The Netherlands this mortgage intrest deductability must come to an end as it is paid for by Gas findings which will last only 20 more years.
However no politician wants to touch this item so as always the problem is postponed until the country rolls of the cliff (or in this case into the sea).
Wonder what the Dutch will do in 20 years as 90% of central heating is with Gas and only 10% (no chimneys) has the possibility of firing wood in their homes.
Guess these 10 % will gain value in the future. Too bad the country is that crowded that all the trees in Holland will only keep warm a very limited number of people.

Meanwhile at the last summit of G7 Dutch finance minister Bos said IMF findings concerning overvaluation of Dutch housing were highly exagerated.

04-16-08, 03:21 AM
Hi Oldovai,

comparing the Dutch and German real estate markets is very interesting as they have moved in such different directions in the last 15 years.

My take is that the Germans have had to deal with the enormous costs of reunification (an additional tax was levied, not sure whether it still is).

Also take home pay did not increased in those years. While the Netherlands were opening up their labour market and temporary employment agencies started to become sucessfull in Germany the labour market stayed very rigid. People prefer to hold tight and have their purchasing power crimped than allowing the labour market to open up. That has meant that salaries have pretty much stayed the same, so buying a home was not an option for many families. Younger families are faced with the fact that they will not be able to be mortage free by retirement age, which has been pretty much a goal for their parents generation.

Another reason is that renters enjoy a lot of protection by law in Germany. It is very difficult to get renters out of a property. So many people are quite confident renting. In many cases owning a property does not really make financial sense. It is often a psychological benefit that will make people want to own their home.

Last but not least the mortage market in the Netherlands seems to have evolved more than the german. In Germany you pretty much get the same mortage products than a generation ago, while in the Netherlands there are all kinds of mortage products to "suit your needs". As it has turned out these products are now very much in the headlines as they show to have been so loaded with fees and costs that the homeowners have been fleeced.

Eastern Belle

04-16-08, 03:22 PM
Hi there Eastern Belle,

Please note that The Netherlands have one of Europe's highest rental housing percentage say approx. 50% (used to be even higher). Also pretty good protection. (Have recently noticed German protection is that good that private housing investers are selling because of this reason. So this protection is starting to bite it's own tail because it leaves fewer properties on the rental market.)
Economic situation in both countries "booming" in past years, although unemployment used to be lower in The Netherlands.
Apart from tax deductability in The Netherlands situation more or less the same from my perspective.

I still think that at it's core it's attitude related. Perhaps because of remembered problems during Weimar. I think this is why the German banks are the only ones in Europe not having offered "exotic" loans and haven't "whipped up" the market. Too bad they didn't apply this rule for themselves.

Perhaps you can shed a light on my remark that the Germans are looking at real estate more as a consumer good than as an asset.
The opposite was one of the main reason's (affirmed and stimulated by the banks so even more loans could be taken on again and again) that housing went awol in US and UK.