One of the major effects of the credit crunch in Europe has been the impact on the  willingness and ability of banks to lend mortgages at affordable terms and rates. This has really begun to bite in the UK; bigger deposits are now required and we have seen huge cuts in both the Bank of England and European Central Banks’s base rate. The extent to which these cuts have been passed on to consumers varies depending on the lender, or country in question.

For those who borrowed at a high loan to value ratio only in the last year or two, the spectre of negative equity, coupled with higher mortgage rates when their initial deal comes to an end, means things are definitely looking not quite as rosy as they once were in the property market.

Of course, in terms of prices, property is just an asset class like any other investment, and over time we will see cycles of high growth and times of declining prices. Both the UK and the US have seen a fantastic boom in property prices for over 10 years; put simply, a correction was bound to happen some time.

So what about Property in Holland?
After a period of strong growth of house prices in the Netherlands from 1995 to 2001, when house prices increased by 15 percent – 20 percent annually, we have seen much more steady growth. The average price in Centre of Amsterdam decreased by 5.8 percent in the last quarter of 2008, and 3.4 percent in Amsterdam Zuideramstel. However in more affordable areas like Slotervaart there was an increase of 2.1 percent. This is a picture which is similar to all the big cities like Den Haag, Rotterdam and Utrecht.

Expatriates in the Netherlands have long seen the benefits of buying property here. In general it is cheaper than renting, and the flexible mortgage system and tax reimbursement make it very attractive for those who plan to stay for at least a few years.

Some key points need to be kept in mind. First, The Netherlands is one of the most densely populated countries in the world. With a land area of 41,526 square kilometres (18 percent of it covered by water) and a population of 16.4 million, the density rate is about double that of the UK, and about 13 times that of the USA. This lack of space translates into a strong demand for housing.

Also, around two-thirds of the population is located within the Randstad; the area connecting the four largest cities (Amsterdam, Den Haag, Utrecht and Rotterdam).
Finally, there is the practice of awarding tax-relief on mortgage interest, making it more attractive to buy, forcing prices up. The average price of a house in the Netherlands is now EUR 244,000.

So have we seen the market start to fall here? Chris Van Maasdijk, partner at Expat Mortgages has certainly noticed a change, and he sees prices in general barely keeping up with inflation. 

“There are still areas that are very specific and do show an increase (popular parts of Amsterdam) but overall buyers are getting cautious, influenced by the credit crisis and US and UK property markets,” he says.

"Still, we have not seen the collapse of the property market here like we have seen in the USA, UK and Ireland and the market has made the shift from a sellers to a buyer’s market."

As ever, location is a main factor to consider and the prime areas of the major cities continue to see price rises. Whether we will start to see a drop in house prices equivalent to the UK remains to be seen, and to a large extent the global problems in the banking sector will play a major part in determining where the market goes from here.

Craig Welsh runs the Amsterdam branch of Spectrum IFA Group (www.spectrum-ifa.com), specialising in helping expatriates with their financial planning. Chris Van Maasdijk is a partner at Expat Mortgages (www.expat-mortgages.nl), a mortgage advice firm specialising in finding mortgage solutions for expatriates.

July 2008 -- updated April 2009

Expatica/ Craig Welsh