Housing market picking up but mortgage debt remains a problem

July 15th 2014:

Housing market picking up but mortgage debt remains a problem

Estate agents in the Netherlands are cautiously hopeful that the housing market is picking up nearly six years after the bubble burst.

Figures compiled by the National Association of Estate Agents (NVM) showed that the number of homes sold went up by 41 per cent during the second quarter of 2014 compared to a year earlier.

The average house price was up by 3.5 per cent in the second quarter, according to the NVM. Prices have been rising year-on-year since April, but homes are still worth around 16 per cent less than at their peak in August 2008.

The figures also show large disparities between different regions, with the cities recovering faster than the provinces. Prices have been rising in Amsterdam and The Hague since March and were up by more than 10 per cent in the capital for the three months to June.

Statistics Netherlands (CBS) is due to publish the official figures for June next week, but the first five months of the year have seen a sharp rise in the number of house sales. Between January and May 51,709 houses were sold, 36 per cent more than in 2013 and 15 per cent ahead of the average for the last five years.

The Amsterdam Herald’s rolling 12-month tally shows sales rising to their highest level for three years and 9.4 per cent higher than a year ago.

Ger Hukker, chairman of the NVM, said: “We are pleased that the market is rising again, but we have to realise that these are averages. These figures are not reflected in the experiences of everyone in the Netherlands.

“The regional differences are great and some types of homes, such as detached houses, are still falling in price year on year.”

The scale and impact of the housing crisis also means many homeowners are continuing to sell at a loss. The average price remains 7.2 per cent lower than two years ago and 15.6 down over five years.

The government has relaxed the rules on lending in the hope of stimulating the market. Gifts of up to €100,000 to family members are now tax-free if the money is spent on housing costs, such as paying off a mortgage or building an extension.

Loans or gifts from family members now underwrite nearly 9 per cent of all house purchases, at an average contribution of €60,000.

At the same time the government is scaling back tax relief for mortgages, which has been blamed for inflating the bubble by effectively subsidising mortgage debt.

Since January 1 the National Mortgage Guarantee (NHG), has been extended to cover negative equity, enabling anyone selling at a loss to include their surplus debt in a new loan.

However, the NHG only applies to mortgages worth €250,000 or less and the ceiling is being reduced by €40,000 over the next two years.

Source: De Volkskrant (translation: The Amsterdam Herald)