RaboResearch - Economic Research

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The Netherlands: more jobs and pricier houses

Economic Update

  • The Dutch economy grew by 0.4% in the third quarter
  • There are some 48,0000 more people with paid work, and the number of ‘discouraged’ workers has declined
  • The demand for owner-occupied homes remains high, leading to strong sales and rising house prices
Table 1: Key figures on the Dutch economy
Table 1: Key figures on the Dutch economySource: Rabobank

The Dutch economy continuesto experience a broad based recovery. According to first estimates of growth in 2017Q3, the volume of GDP increased with 0.4% q-o-q. Meanwhile the labour market keeps churning out new jobs, with unemployment rates having declined to levels last seen in the summer of 2009. In combination with high confidence levels among consumers, this is pushing demand for owner-occupied homes in the Netherlands. This leads to increasing sales and prices.

Growth in 2017 is expected to be 3.3%, the highest growth in ten years. In addition, the new coalition wants to increase government spending and reduces taxes, which should boost GDP growth in the coming years. We are currently assessing the effects of these measures on our economic forecasts and will publish our updated growth figures in our annual outlook later month.

Strong recovery of the labour market

According to the first official estimates from Statistics Netherlands (CBS), Dutch GDP was 0.4% higher in the third quarter of this year than in the second. As usual, exports contributed strongly to the growth (see figure 1). This reflects the positive figures seen in the rest of the Eurozone. Higher household consumption and increased business investments also boosted GDP, which is not surprising given the high confidence levels among both producers and consumers. Additionally, the Dutch manufacturing PMI rose to 62.1, its highest level yet. This signals favourable months ahead for producers, who noted that in November they had received a remarkably high amount of new orders, especially from abroad.

The economic recovery is also noticeable on the labour market, with strong employment growth in the last year. In the third quarter of 2017 some 48,000 more people were employed compared to a quarter earlier. The commercial services sector, which includes temp agencies, was responsible for almost half of that boost in employment. Similarly positive is that the number of discouraged workers strongly declined in the past year. In the third quarter of this year the number of people who are not looking for work anymore, despite being available for a job, decreased to 83,000 compared to 131,000 at the end of 2015 (figure 2).

High employment growth has led to a strong decline in unemployment. In October the unemployment rate further declined to 4.5%, which is a far cry from the 7.9% in the beginning of 2014, when the labour market turmoil reached its climax.

Figure 1: Higher export and consumption
Figure 1: Higher export and consumptionSource: Statistics Netherlands (CBS)
Figure 2: Fewer discouraged workers
Figure 2: Fewer potential workers without hopeSource: Statistics Netherlands (CBS)

Higher prices on the Dutch housing market

With rising employment and consumer confidence at persistently high levels, demand for homes remains strong. In the third quarter of this year a record number of 61,391 houses changed hands, more than in any other quarter. But not everyone is buying in the same record numbers anymore: in the third quarter those below 35 years old bought 2.6% fewer homes than a year earlier (see figure 3). The shrinking supply of homes and rising prices seem to be particularly affecting first-time buyers and young homeowners. Given that they are the largest group of buyers, we expect the number of sales to moderately decline in 2018 to 225,000 compared to 240,000 this year. The share of older buyers is expected to keep growing, given that this demographic is more likely to have their own resources when they want to buy a new home, while recovering house prices also mean they have surplus equity.

Figure 3: Younger buyers
Figure 3: Younger buyersSource: Statistics Netherlands (CBS)
Figure 4: Almost back at peak levels
Figure 4: Almost back at peak levelsSource: Statistics Netherlands (CBS)

And those prices have been recovering very quickly: on average buyers paid 7.5% more for a home than in the same quarter a year earlier, and in the first month of the last quarter, October, the YoY price growth was 8.2%. This strongly reflects the high demand and for homes and declining supply especially in popular areas like the ‘Randstad’, the area surrounding and including the four largest cities. We therefore expect prices to keep rising in 2018 (see figure 4).

Table 2: Economic forecasts
Table 2: Economic forecastsSource: Rabobank, Statistics Netherlands (CBS)

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