Netherlands, when will the housing crisis due to income squeeze?
Something has to happen in the Netherlands one of these days. It is not possible for a country to see a continuous increase in real estate values accompanied by incomes that are not growing adequately, increases in the various expenses of families, all without a problem coming out sooner or later.
Let's start with household spending: Household consumption in the Netherlands increased by 14.8% yoy in April 2022, accelerating from an 11.2% increase in the previous month, indicating the strongest growth since beginning of the series in 2000, due to the lifting of the COVID-19 restrictions. Spending on services grew the fastest (27.1 percent versus 18.2 percent in March), mainly phone and internet subscriptions, insurance, a visit to the hairdresser, a restaurant or a football match. Meanwhile, consumer durables spending continued to rise (8.2 percent versus 10.9 percent), supported by clothing, shoes and electrical equipment, due to the lifting of Covid-19-related restrictions, while a year earlier, non-essential shops were still hampered by confinement.
So Dutch families look lucky and, after the covid, they are triggering an unprecedented increase in consumption in the last decade
The increase in consumption, however, contracts disposable income, which pays for the continuous real estate boom that the country is experiencing. A boom fueled by debt and which sees an impressive growth in average prices, which have almost doubled since 2014
The boom was favored by the zero interest rate policy, and led to a real explosion of private debt, which came to weigh almost three times the GDP.
Unfortunately, more recent data are missing: it would have been interesting to see the trend in 2021, taking into account the cost of real estate. However, with rising rates and an important slice of income dedicated to consumption, there should be some doubts that the real estate debt bubble can continue for a long time. All the more so as property prices are starting to show signs of fatigue and we see the first drops. In this situation it will be difficult to refinance mortgages or sell properties without losses. It will be interesting to see the fallout of all this on an "Austere" country and an enemy of public debt. We can foresee some Italianisation …
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The article Netherlands, when will the housing crisis due to income squeeze? comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/paesi-bassi-a-quando-la-crisi-immobiliare-a-causa-della-compressione-dei-redditi/ on Wed, 22 Jun 2022 11:27:10 +0000.