Economists draw up housing market action plan

A group of 22 leading Dutch economists have devised a six-point plan to reform the Dutch housing market, which has been hit by falling house prices and sluggish sales.

The economists hope the initiative, which includes phasing out mortgage tax relief, will help the government decide how to tackle the crisis. The minority cabinet and alliance partner PVV had agreed to leave the tax break on home ownership unchanged until 2015, but pressure is mounting on them to take action.
The plan has been signed by noted economists such as Lans Bovenberg, Arnoud Boot, Sweder van Wijnbergen and Herman Wijffels.
Mortgage debt
They say the current system of financing owner-occupiers has led to households taking on mortgages which are too big. To solve this, mortgage tax relief should be phased out, as should property transfer tax, which is paid when a property changes hands.
Last August, the government cut that tax from 6% to 2% of the purchase price, saving buyers thousands of euros. But the measure appears to have failed to boost the housing market, according to recent land registry figures.
The current Dutch system allows home owners to deduct all their mortgage repayments from tax for 30 years.
The economists also call for an increase in housing rents to ‘market’ levels. The government has already agreed that landlords can put up rents by an extra 5% if their property is lived in by households with an income of more than €43,000 a year.

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