While lecturing their southern neighbors about frugality, the Dutch have run up the highest rate of mortgage debt in Europe. Their borrowing, fueled by generous tax breaks and subprime-style lending practices, now totals 107 percent of the country’s gross domestic product, more than twice the European average of 50 percent. “It’s one of the big scandals of Dutch policy,” says Rick van der Ploeg, an Oxford university economist and former Dutch cabinet minister. “The government has encouraged reckless financial speculation.
- No one worried much about the situation so long as housing prices kept rising—as they did for more than two decades, until 2008. Since then, though, they’ve slid 16 percent, pushing almost one-fourth of mortgages under water. Royal BAM, the country’s biggest homebuilder, expects the decline to continue for another 2 or 3 years, for a total drop of up to 30 percent. Such a scenario would rival Spain’s real estate collapse.
- The debt load is already putting strains on the economy. Highly leveraged households have trimmed their consumer spending, helping to push the country into recession. Dutch GDP is forecast to contract 0.5 percent this year, the worst performance of any northern European country. “The high stock of mortgage debt is among today’s biggest vulnerabilities of the Dutch economy,” Klaas Knot, the country’s central bank chief, said in an Oct. 15 speech.
yet another “Dutch Disease”? :)