Netherlands House Price Crash Underway; Will France Follow?

The Netherlands has the 5th largest economy in the eurozone. Home prices are in the midst of a huge plunge notes reader Andrea who is from Italy but now lives in France.

Andrea supplied links to articles in the Wall Street Journal and Bloomberg. She writes ...

Hi Mish,

I just found out that Netherlands are currently experiencing a housing bust after a huge bubble: strange how this has got so little media and blog coverage.

Netherlands is the fifth economy in Eurozone. As usual, the bubble was blown by inane fiscal policies along with cheap money.

France could be headed to the same path, even if there are 2 main differences compared to Netherlands, Ireland and Spain : demographics (France has the best demographic trend in Europe) and Paris, which is quite a particular market due to its "status" of very nice and well known city (many buyers in Paris are foreigners, many also from outside EU).

But, generally speaking, many data show that prices in France and especially in Paris are hugely above the normal historical standards and a very strong correction in going to come sooner or later. Latest fiscal policies from the government may accelerate the bust.

Best regards,

Andrea

Dutch Housing Prices Tumble

The Wall Street Journal reports Dutch Housing Prices Tumble

The slump in the Dutch housing market deepened in July as prices posted the steepest drop on record, highlighting the challenges facing the Netherlands ahead of next month's general elections.

With prices now plumbing levels last seen in 2004, the downturn is weighing heavily on household consumption and has raised concern about the country's huge mortgage debt pile, among the largest in Europe

House prices fell 8% from a year earlier, statistics bureau CBS said Tuesday, the largest decline in the 17-year history of the agency's house-price index. Prices fell 4.4% in June and 5.5% in May.

Record Price Drop

Similarly, Bloomberg reports Netherlands House Prices Dropped the Most on Record Last Month

House prices in the Netherlands, the fifth-biggest economy in the euro area, dropped in July by the most since the index started in 1995.

Prices declined 8 percent from the same month a year earlier, after falling 4.4 percent in June, national statistics agency CBS in The Hague said on its website today. Values have fallen 15 percent from a peak in 2008 and are back to about the same level as eight years ago, CBS said. Prices had already dropped 5.5 percent in May from a year earlier.

The Dutch Central Bank forecast in March that house prices will continue to drop through 2014 because of stricter mortgage lending rules and a reduction of a homeowner tax break that spurred the lending boom. Values may fall another 5 percent next year, ING Groep NV economists said in a note Aug. 9.

What About France?

France is the eurozone's second largest country, following Germany.

Note that French unemployment topped 3 million in August for the first time since 1999. France is now in a 16-month employment slide.

Government forecast for France is GDP +1.2%. I already believe that estimate to be way over-optimistic. Should a major housing bust pick up steam, a decline of 1.2% will start to look rosy.

Given president Francois Hollande's seriously misguided tax policies coupled with inane business work rule proposals, there is every reason to expect a major French housing bust accompanied by sharp downward revisions in GDP estimates.

For more on France, please see ...

• France Set to Implode; Troika Soap Opera; Grappling with Neo-Nazis
 
• Austerity Programs Hit France; Marchers Demand Vote on Treaty; Hollande Reneges on Campaign Promise
 
• France to Set Top Marginal Tax Rate at 75%, Permanently Increase Wealth Taxes, Hike Surcharges on Banks and Energy Companies; Further Tax Hikes Next Year

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com