How will the house price boom in the Netherlands respond to an economic slow down?

It has been a while since we have gone Dutch and taken a look at the economic situation in the Netherlands. The first point to note is that it has followed the Euro area trend for lower growth.

According to the first estimate conducted by Statistics Netherlands (CBS) based on currently available data, gross domestic product (GDP) expanded by 0.2 percent in Q3 2018 relative to the previous quarter. The growth rate was the lowest in over two years. Growth in Q3 was due to increased household consumption and international trade.

There is a difference here in that it managed to find some growth in trade as opposed to Germany where a decline pushed it into contraction in the latest quarter.  But in essence we are seeing yet again a consequence of the slow down of the Euro area monetary data feeding into economic activity. In the case of the Netherlands this came from a high base.

According to the first estimate, GDP was 2.4 percent up on the same quarter in 2017. Growth was mainly due to higher consumption. Investments in fixed assets and international trade also contributed, but less than in the previous quarter.

So we see that annual growth remains strong for now at least and that there has been a consumption boom.

In Q3, consumers spent over 2 per cent more than in Q3 one year previously. For 18 quarters in a row, consumer spending has shown a year-on-year increase.

A driver of this will be the strong employment situation.

Between August and October 2018, the number of people aged 15 to 74 in paid employment grew by an average of 20 thousand per month. Total employment stood at more than 8.8 million in October. Unemployment declined by an average of 4 thousand per month to 337 thousand.

Statistics Netherlands is harsh relative to others as it counts up to the age 75 got these purposes. Also it looks like the underemployment situation has improved too.

 The total unused labour potential in Q3 2018 comprised nearly 1.1 million people. This was almost 1.3 million one year previously.

This is not leading to a trade problem though although part of the good performance is not in line with the times.

Statistics Netherlands (CBS) reports that the total volume of goods exports grew by 5.1 percent in October relative to October 2017. Relative growth was higher than in September. In October 2018, exports of transport equipment, metal products, machinery and appliances increased most notably. The volume of imports was 4.4 percent up on October 2017.

The Netherlands must be the only place where transport equipment sales are up. Also not so many have trade volumes up right now. In terms of context we do need to note this though.

On balance, the Netherlands enjoys a goods trade surplus, i.e. exports exceeding imports. Re-exports play a significant role in the Dutch goods trade surplus. In 2016, approximately 36 percent of the surplus was caused by re-exports.

Looking Ahead

Yesterday the central bank the De Nederlandsche Bank (DNB) gave us its view.

While the economic boom is sustained, growth of the Dutch economy will slightly decelerate in the next few years. Growth in gross domestic product (GDP) is estimated at 2.5% for 2018, followed by 1.7% in 2019 and 2020.

Unlike in some Euro area countries that does qualify as a boom in these times. If we look back we see that since the 99.9 of the second quarter of 2013 GDP has risen to 112.2 where 2010=100. That also tells us that the Netherlands was pulled back by the Euro area crisis which preceded that.

The next bit is rather more uncomfortable, however.

Despite slightly lower growth figures, the Dutch economy will be running at full steam in the years ahead, with actual output exceeding its potential. Unemployment is set to remain very low. Households should benefit from a pick-up in wage growth, which will boost real disposable income in 2019 and 2020

It looks good but how is 1.7% growth “full steam” compared to this?

GDP growth peaked at 3.0% in 2017  and is estimated at 2.5% for 2018.

This is because central banks like to travel in a pack as we observe what is now their way of spinning their rather depressing view of our future.

It will recede to 1.7% in both projection years 2019 and 2020, approximating potential growth of around 1.6%, with the output gap widening from 0.3% in 2017 to 1.0% in 2018.

Sadly they never get pressed on this. After all they have interfered in so much of economic life with in this instance enormous QE and negative interest-rates but they seem to get a free pass on the issue of economic growth now being regarded as being likely to be lower than before. Even when Mario Draghi opens both the door and the window.

but certainly especially in some parts of this period of time, QE has been the only driver of this recovery.

Also even the slower growth future relies on something which has to now be in doubt.

In 2018, gross remuneration per employee in the business sector is set to regain momentum, growing by 2.3%. Our projections show that it will be 3.0% in 2019 and 3.8% in 2020, assuming the usual wage-price dynamics.

The emphasis was mine to highlight that no matter how often the output gap theory fails it comes back to life. No silver bullet seems to be pure enough to kill this vampire! Whereas if we continue to see an economic slow down then after a lag wage growth will presumably slow too rather than continue to pick-up. Although it would appear that should something like that happen an excuse is in place, what is Dutch for Johnny Foreigner please?

An alternative scenario featuring a downward correction in international financial markets sees the growth rate for emerging market economies – including China – deteriorate. This also affects the Dutch economy due to increasing risk aversion, slowing global growth and reduced confidence. Compared with our projections, this could send annual GDP growth 0.4 percentage points lower on average in 2019-2020.

House Prices

This will be on the video screens at the DNB and ECB Christmas parties,

In September 2018, prices of owner-occupied dwellings (excluding new constructions) were on average 9.3 percent higher than in the same month last year. The price increase was the same as in the previous month. This is according to the price index of owner-occupied dwellings, a joint publication by Statistics Netherlands (CBS) and the Land Registry Office (Kadaster).

This will raise a cheer and then boos.

House prices reached a record high in August 2008 and subsequently started to decline, reaching a low in June 2013.

Before the party really gets going again!

In May 2018, the price index of owner-occupied dwellings exceeded the record level of August 2008 for the first time; prices continued to rise and are at their highest level since the start of this price index in 1995. Compared to the low in June 2013, house prices were up by over 32 percent on average in September 2018.

Or in twitter terms 🍾👍


The economic going has been good in the Netherlands. Well unless you are a first-time house buyer watching prices accelerate away from you. But now even it must be wondering what 2019 will bring and how much of an economic slow down it will see? Just a continuation of the 0.2% quarterly economic growth just seen will tighten things up a bit and that happens with negative interest-rates and a ten-year bond yield of only 0.4%.

Yet some continue to churn out the line that interest-rates are going to be raised in the Euro area. I just do not get it.







13 thoughts on “How will the house price boom in the Netherlands respond to an economic slow down?

  1. Hello Shaun,

    I missed your post yesterday about house prices in the 9 Elms. From a Surrey perspective I’m selling off my father’s property now he has passed away . the market has softened as they say in the estate agents parlance . 650K to 550K to offers in excess of 500k for a neighbors property over the past 12 months – yah 650k was blue sky pricing encouraged by web sites like Zoopla ( apparently they like a giggle over there !)

    Although its not Brexit the agents say, it’s BTL landlords trying to get out of the market…..

    So what’s driving Dutch prices ?

    Will the ECB care?

    I have no doubt that a Euro zone recession will be blamed on Brexit – after all everything else is 😉


  2. To quote George Hamilton in “Love at First Bite”: “Silver bullets? No, Rosenberg, that is for a werewolf!”

    So no wonder it’s not working.

  3. This has to be the most eclectic blog on the interweb it’s great for those of us with a wide economic interest. One day, when I’ve finished humiliating myself copywriting and creating banners I will find out why the output gap is systemically wrong everywhere. A great example of this can be found in Germany.

    Experts are astonished that the recent wave of immigrants have mostly just sunk into the economy some 400,000 of them. They have jobs or apprenticeships with nary a blip in wages. What the devil was the output gap if so many can be absorbed so soon?

    Work, work, work, work, work, work
    You see me I be work, work, work, work, work, work
    You see me do me dirt, dirt, dirt, dirt, dirt, dirt
    There’s something ’bout that work, work, work, work, work, work
    When you a gon’ learn, learn, learn, learn, learn, learn
    Me na care if me tired, tired, tired, tired, tired, tired

    • Germany absorbed the piano teachers, engineers and other qualified people (i.e. the net contributors) and then tried to shunt off the remaining people to the rest of the EU

        • Well that’s still a problem these people will never generate enough taxes to cover the expenditure on them. All to the detriment of the native born population.

          No wonder people are getting angry

          • That’s also not true, you’re talking in terms of income tax only. What is needed are mitigating policies such as a Job Guarantee for the native born population. That is the cause of resentment but a long way off topic.

  4. Strictly off topic Shaun, but do you understand why Italy is castigated for proposing a 2.4% deficit and France is ignored when its deficit is expected to hit 3.6%?

    • Officially its because of Italy’s massive Govt debt (130% of GDP or thereabouts), so they have less head room on deficits in the futile attempt to pay it off.

      France is only slightly better (debt to GDP nearer 95% I think) so they potentially have a bit more wiggle room to run in the short term a higher deficit.

      The reality is the ‘all men are equal just some are more equal than others). France, along with Germany are seen as the key members (as that was what the EU was set-up for to stop these two countries being at each others throats again by binding them econiomically). So they afforded options denied to the rest of the EU/Eurozone.

      The UK was always the odd one out in this respect, too big and important to ignore economically but still not seen as a key member other than a net contributor, major net importer (and major military power in Western Europe)

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