The Wilder View

Dutch Domestic Demand Dragging Real Home Values

Today Statistics Netherlands (CBS) warned “House Prices Nosedive“.

Prices of existing owner-occupied dwellings sold in July 2012 were on average 8.0 percent down from July 2011. This is the most substantial price drop since the price index of existing residential property was first recorded in 1995.

In real terms and indexed to 2005, home values are down 10.1% over the year in July and dropped 21.3% since the August 2007 peak.

Closely related to the depreciation of home values is underlying domestic demand.

The labor market is sinking, and taking with it household demand. Companies probably hoarded labor in the crisis – the peak to trough drop in GDP was 4.9% versus a 1.6% cyclical drop in employment around that period. However, in late 2011 employment peaked and unemployment is surging – the quarterly employment data through March 2012 indicate a peak was seen in Q3 2011.

On balance, the downtrend in Dutch home values is probably here to stay. FYI: the balance sheet of Dutch households and non-profits is roughly 2.5 times levered.

Rebecca Wilder

5 Responses to “Dutch Domestic Demand Dragging Real Home Values”

ChrisAugust 22nd, 2012 at 9:22 am

Sorry to quibble but I don't think that levered is correct at the end of the post. This is not leverage of the balance sheet (or gearing) at all which is probably well under 0.5

This is the ratio of debt (a stock) to income (a flow) and is in no way comparable to the way in which one would talk about – say – the amount of leverage on the balance sheet of a bank or property company which is the ratio of the value of assets to the amount of debt secured against those assets

TobinAugust 23rd, 2012 at 9:30 am

Its about time Merkel's policy to affect economies other than of the South. 1929 is coming back soon…But this time it is not called Great Depression but Internal Devaluation and Competitiveness…

danielrose154November 12th, 2012 at 9:29 am

This statistics is quite old but it could be the basis of the movement of property valuing today. As a property valuer in Perth, I could see that there's a potential of an increase next year because the movement is pretty consistent.

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