The government failed to take measures to manage the Dutch housing bubble, which saw prices soar and home owners maximise their loans to buy the most expensive houses possible, according to a parliamentary report.
Parliament set up a temporary commission to study the impact of house price rises between 1995 and 2012. Between the start of the study period and 2008 when the economic crisis kicked in, Dutch house prices rose 250%.
The increase in house prices corresponded with rising national debt. Home owners were encouraged to borrow as much as possible, fuelled by limitless tax relief on mortgages. Some were able to borrow six times their annual salary, the report said.
Mortgage lenders and construction firms in particuar were able to benefit from a shortage of homes for sale, the report said. Few new homes were being built as developers preferred to invest in commercial property and speculation.
Despite warnings by the central bank and financial services regulator AFM, the government failed to take any steps to temper the price rises. Measures which were taken, such as limiting mortgage tax relief to one property only, were taken in order to boost tax receipts rather than limit house sales, the report continued.
In February, housing minister Stef Blok agreed a package of housing market reforms which include reductions in the tax breaks on mortgages and some help for first-time buyers.
The parliamentary report coincided with new recommendations from the European Commission which say the Netherlands should take ‘gradual’ steps to further reduce mortgage tax relief.
It is not yet clear if the measures agreed earlier this year by the housing minister will have the desired effect although they are ‘a step in the right direction,’ the commission said.
In addition, ‘measures are required to correct rigidities in the housing market, including those that have prevented the emergence of a functioning private rental market of appropriate size,’ the commission said.