Dutch housing market gets a boost from new coalition plans

• The Dutch government plans to build at least 100,000 houses on an annual basis.
• The procedure around building permits will be less restrictive and objecting against new building permits will be discouraged.
• Plans are put together to structural increase disposable incomes, which will likely have a positive impact on credit performance.

TACKLE THE HOUSING SHORTAGE

The central theme in the Dutch housing market is the structual housing shortage. The new government has labeled the housing crisis as one of the main issues that needs be tackled in the coming years. The cause of the shortage in the housing sector can be explained by 1) the significant growth of the population from 17mln in 2017 to 18mln in 2024, and 2) the limited supply (construction and transformation) of new houses. In the past few years the construction of new houses was severely impaired by the ever increasing number of environmental rules and the limited availability of residential areas. By simplifying and accelerating building procedures, and limiting the possibilities to object against building permits, the new governent expects to tackle at least part of the housing crisis.

IMPROVING DISPOSABLE INCOMES

We expect that the planned measures to improve the purchase power of low to median incomes will have a positive effect on the credit performance of the current mortgage portfolios, especially in the NHG market. We are less concerned about the position of higher incomes in this respect. As far as we can see, the improvement of lower incomes is not at the cost of higher incomes. A very important detail of the plan is that childcare will be at low to 0 cost. As long as new purchase power is not translated into further increase of maximum debt service percentages for lower incomes to determine a maximum loan amount, this group may see a sustainable increase in their income position. Lastly, specific for the Dutch housing sector, the system of mortgage interest tax deduction, will remain fully in tact. This will protect mainly higher incomes from deterioration in their net mortgage payments.

PUNISHING INACTIVE LANDOWNERS

Owners of land with the purpose of residential housing will be taxed if the residential function is not used. This is a creative and punishing tax. 

THE PROOF IS IN THE PUDDING

Although important details are still missing, it is very clear that the new government is making the housing market a top priority. And of course it remains to be seen wether al these plans can or will be fully implemented. For the investor in Dutch residential mortgages it is beneficial to keep a close eye one these latest developments. The supply of new houses will take pressure off the housing market Disposible incomes of the lower and middle incomes will structurally increase. This will likely have a positive effect on credit performance The new to build plans will increase the supply and ultimately the stock of houses. This may have a dampening effect on the development of the house price index. But it's important to keep in mind that, even with these plans being executed on, the structural shortage will take many years to resolve.

PART 2

As noted earlier, the details of these plans are still being finalized. In the coming weeks, the new government is expected to release more specific information about each measure. Consequently, we will provide further details in Part 2 of this publication as soon as the relevant information becomes available.