The Unassuming Economist

The IMF’s latest report on Netherlands points out the following:

• “House prices have been accelerating and close monitoring may be warranted in the country’s main cities. After turning a corner in 2014, house prices have been steadily accelerating and transaction volumes have doubled in 2016. At the aggregate level, real house prices are broadly consistent with long-term equilibrium (priceto-income, price-to-rent ratios, Figure 3) but developments have been uneven across regions, with prices for apartments in Amsterdam 15 percent higher than a year ago. After plummeting by 20 percent during the crisis, commercial real estate has only started to recover recently.”

• “Households remain highly leveraged, with a sizeable share of mortgages in negative equity.”

• “Staff recommends accelerating the implementation of macro-prudential and other measures aimed at lessening household financial vulnerabilities. The authorities should build on recent initiatives, (…) They should accelerate the phasing down of mortgage interest deductibility (MID), by at least 1 percentage point per year ultimately bringing it to a neutral level relative to the taxation of other assets. (…) The authorities should continue to gradually lower the maximum limit on LTV ratios by at least 1 percentage point per year to no more than 90 percent by 2028 and to 80 percent thereafter. (…) The authorities should introduce prudential ceilings on debt service-to-income caps by income category that could not be relaxed during periods of strong growth.”

• “The private rental market needs to be deregulated and placed on a more even footing with owner-occupied homes and social housing.”