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Financial stability on the housing market – policy changes and vision for the future

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Dutch housing market – We visited a speech and Q&A with Minister for Housing Stef Blok at a mortgage event “Investing in the Dutch Loan Portfolio” held in Amsterdam.

The Dutch house market is recovering but average sales volumes are still some 25% below pre-crisis levels. Longer term structural housing demand remains solid on the back of demographics; diminishing household size and a growing population. Changed government policy of lower loan-to-value (capped at 100% by 2018), higher loan-to-income demands (predominantly for lower incomes), mandatory amortisation and lower deductibility (for higher incomes) has a dampening effect on the Dutch market for now. Incremental policy measures, like further lowering LTVs, to reform the owner occupied buyer’s market in the Netherlands are unlikely. Risks are very limited as expected default rates are below 3%, which is the second lowest in Europe (just behind Belgium). Despite these low risks it is likely that the Dutch banks will lower their relative exposure to Dutch mortgages given upcoming regulator demands (IFRS 9, Basel 4, leverage ratio). Hence, the Dutch mortgage market needs new funding sources. According to Blok, new (international) players to fund Dutch mortgages are gradually appearing in the Dutch market which could solve the funding issue.

Another item discussed was the rental market. The Netherlands has the biggest subsidized rental market in the world. This suffocates opportunity for the commercial rental market. Policy is and will be geared towards decreasing the stock of subsidized housing which should provide more room for the commercial rental market to develop. Blok expects that commercial rental will grow even faster than owner occupied.

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