ABN AMRO Covered Bond Watch - Dutch housing update August

Marketing Communication
Covered Bond Watch
Dutch housing: strong start to 2014H2
Group Economics
Macro & Financial Markets Research
Joost Beaumont +31 20 628 3437
21 August 2014
The Dutch housing market started the second half of this year on a strong note. House prices as well as
transactions continued to rise solidly in July. Historically low mortgage interest rates and improving labour
market conditions seem to be the key drivers supporting the market. The main limiting factors remain
stricter lending conditions and the residual debt problem. As such, we expect only a modest recovery in
house prices, although there is some upside potential, given the current positive developments.
Housing market continues to improve
Total home sales in January-June period
The recently published data on the Dutch housing market were
number
again positive. They showed that the market has started the
140000
second half of the year on a strong footing, while the outlook
120000
remains bright as well. Today, the official house price data
100000
(excluding newly constructed houses) increased by 1.9%
80000
compared to July last year. On a monthly basis, they were up
60000
by 0.8%. This year, house prices (on a monthly basis) only
40000
dropped in March, with July’s figure being the biggest increase.
20000
Currently, house prices are at roughly the same level as in
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(published by Statistics Netherlands) showed that house prices
May 2003. This is still 19.1% below the peak of August 2008,
but 3.1% higher than in June 2013 (when the trough was
Source: Statistics Netherlands, Land Registry
reached).
House prices and transactions
% yoy
number (12M sum)
25
20
15
10
5
0
-5
-10
-15
picked up. They increased by 30.2% in July compared to June,
200000
which was the largest increase of all home types last month.
00
02
04
House prices (lhs)
06
08
10
12
Indeed, these figures tend to be volatile, so this number should
100000
be interpreted with care. Nevertheless, it could be a sign that
14
Transactions (rhs)
Source: Statistics Netherlands
Home sales above 13,000
The strong start to the second half of the year was mainly
reflected in the large increase in the number of housing
transactions. In July, 13,883 houses were sold, up from 11,328
in June, and well above the monthly average of around 10K
since the start of 2012. So far this year, a total of 76,920
homes changed ownership, which is an increase of 40.2%
compared to the same period last year (54,860). This was the
highest level since 2008 when the housing market slump
started.
However, the jump follows a 11% mom decline in June.
150000
0
98
indicated that transactions of more expensive homes have also
250000
50000
96
Pickup in sales of more expensive homes
The Land Registry, which publishes the figures on home sales,
the housing market recovery becomes broader based
Outlook bright
Looking forward, the outlook for the housing market remains
bright. More forward looking data on mortgage applications
from the Mortgage Data Network (Hypotheken Data Netwerk)1
showed that the number of weekly mortgage applications has
increased in the past few weeks, following a slight drop at the
start of July. As such, it is likely that the number of home sales
will also increase going forward.
Increased affordability main driver of recovery…
More generally, we think that the recovery will gain further
momentum, mainly supported by historically low mortgage
1
Mortgage applications are measured at the moment a household submits a
request for a mortgage at a mortgage lender, while Statistics Netherlands
registers a home sale at the moment that the transaction is executed at the
notary. As such, mortgage applications lead home sales by a few months.
2
Covered Bond Watch Dutch housing: strong start to 2014H2 - 21 August 2014
prices, has led to a strong increase in housing affordability.
…but also dampening factors
On the other hand, there are factors that work in the opposite
Meanwhile, the housing market will be supported by improving
direction, limiting the strength of the housing market recovery.
labour market conditions. Indeed, the unemployment rate
Mortgage lending conditions have become stricter, the cap on
dropped to 6.7% in July, down from 6.8% in June. What’s
NHG mortgages has declined, while one third of the
more, the decline mainly stemmed from more people finding a
homeowners are in negative equity (i.e. they will face a
job rather than discouraged workers leaving the labour force.
residual debt when selling their homes). Furthermore, there is
Finally, the market will be supported by the temporary policy
still ample supply, which will dampen the pace of increase in
measures of a more generous tax treatment of gifts (which
house prices. All in all, we expect only a modest recovery in
need to be used to buy a home or to lower mortgage debt), as
house prices, although there is some upside potential, given
well as the relative increase in the costs of renting.
the current positive developments.
interest rates, which together with the past drop in house
Unemployment rate
%
8
7
6
5
4
3
2
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
Source: Statistics Netherlands
Consumer sentiment related to the housing market has
continued to improve sharply as well. The sentiment measured
by the Homeowners Association (VEH) continued its upward
trend in June. It rose to 93, which was the highest level since
April 2006.
Although overall consumer confidence dropped a little in July
(to -6 from -2 in June), this was mainly related to the recent
flaring up of geopolitical tensions. The index still remains
above its long-term average, and we therefore do not see this
as an early sign that will affect the housing market.
3
Covered Bond Watch Dutch housing: strong start to 2014H2 - 21 August 2014
ABN AMRO Fixed Income Sales contact information:
Sales region
Name
Tel.nr
E-mail
Head
Roland Kepel
+31 20 383 61 20
[email protected]
Netherlands
Ramesh Gopisingh
+31 20 383 67 45
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Netherlands
Eric Wilde
+31 20 383 6041
[email protected]
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Wouter Kranendonk
+31 20 383 61 37
[email protected]
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Francesco Trivieri
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[email protected]
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Philip Brutsche
+49 69 716735160
[email protected]
Friedbert Mueller
+49 69 716735161
[email protected]
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+31 20 383 61 18
[email protected]
Luxembourg
Bart-Jan Van Der Noord
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France
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and Switzerland
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