In our continuïng soap around the Dutch housing market being totally locked, there is a new episode. Dutch Finance Minister Jan Kees de Jager lowered the conveyance duty on house sales to 2% from 6% of the net purchase price. Dutch newspaper De Telegraaf (www.telegraaf.nl) wrote about it. Here are the pertinent snips:
Conveyance duty to 2 per cent (link in Dutch)
The conveyance duty will be lowered to 2% for one year. Currently, this duty on the purchase of a house is still 6%.
This Friday July 1st, the Dutch cabinet will make a definitive decision on this measure; it will be effective immediately (actually from June 27th).
Who purchases a house ‘today’ would pay 6% of the net purchase price; from tomorrow on this would be 2%. Total abolishment of this duty would prove too expensive. The banks will foot the bill of this measure to unlock the Dutch housing market. A person that buys a house for €200,000 saves €8000 with the new measure. The conveyance duty currently delivers the Dutch treasury €3.5 bln per year
Vice-PM Maxime Verhagen refused to comment on the adjustments last Friday. He advised then everybody with the intention to buy a house, to do so and not wait for changes. On top of that, he reassured that the Cabinet will not change the Mortgage Interest Deduction.
In my May17th article on the Dutch housing market Residential Real Estate revisited, I stated:
There are two kinds of solutions for problems:
§ The (real) solution to a problem
§ The solution that you find, if you don’t want to know the real solution to a problem.
Also this last measure of the government belongs to the latter category. From an earlier article The Dutch housing market is not further locked up…, I quote:
THE main cause for the housing market being locked-up is that the PRICES are TOO HIGH.
I can’t explain to people that in Germany, close to the border with Holland, you buy a residence with 8 rooms and 10,000 Sqr ft of ground for €200,000, while a starters home in The Netherland with 3 rooms and 1350 Sqr ft of ground costs also €200,000
When I tell this to people, they all react like:
§ “Houses are scarce here in Holland”
§ “In the provinces Friesland of Groningen houses are much cheaper too, but there is no work”
§ “It is inevitable because so many people are looking for a house”
My standard reaction is: “if houses are that scarce in Holland, why houses with the current prices are often for sale for up to two years or more”. They reply:”you are right, but we can’t lower the price, as we can’t pay off our mortgage then”.
There you got it! The main reason that the Dutch housing market is locked up is: Many people are up to their neck into debt, due to the fact that their mortgage is way too high, but they don’t want to sell their house for a lower sales price as they can’t afford then to pay off their mortgage.
It is my opinion that Dutch houses are still overpriced by 20-30%. In that situation, deducting 4% from the gross sales price won’t matter at all. Since the credit crisis broke out at the end of 2008, the prices of houses have already lowered by an estimated 8-10%. And the housing market is still locked tight…
People that want to sell a residential house, offer sometimes even discounts of 15-20% on their initial sales price. But almost nobody wants to have their house, anyway. Because it’s still too expensive.
And then the Dutch government thinks that a lousy 4% deduction via the conveyance duty will matter? Get a life!
On top of that, it are the Dutch banks that have to pony up this amount. And as the Dutch banks play a zero sum-game in this kind of situation, the citizens of The Netherlands have eventually to foot the bill for this measure. In The Netherlands, we call this: this plan is ‘a cigar out of your own supply’.
Kees de Kort, the (in)famous columnist of Dutch Business News Radio BNR (www.bnr.nl) was totally right, when he stated that this plan was written by people with ‘nought financial intelligence’. I couldn’t have stated it better.
For my other takes on this subject, please read:
and some older posts on the same subject.
And the Dutch Housing market will remain… locked tight.
I met De Jager some years ago and I think he is one of the geniuses in economy around the whole world, I learned so much from him!
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