Netherlands: Q3′s 17% drop in property transactions suggests housing bust will continue
Many are unaware of this but there is an housing bubble and bust cycle ongoing right now in the euro zone core. I’m talking about the Netherlands, of course. Prices are now back to levels last seen in 2004 and still dropping. The problem in the Netherlands is similar to what we have seen in the US, UK, the Baltics, Ireland and Spain, namely that Dutch house price gains far outpaced economic growth in the lead up to the financial crisis. And now that we have crisis, the bubble has burst, leaving enormous household debts as much as two-and-a-half times GDP. The net effect of this private sector debt overhang has been worsening economic demand and unexpectedly large budget deficits, necessitating austerity under the Maastricht Treaty guidelines.
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My read here is that, if anything, the price declines accelerated in 2012 and that means we are nowhere near bottom for the Dutch property market. More losses are coming – and that is negative for economic demand in the Dutch economy and for the Dutch budgetary situation.
About Edward Harrison
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.
