By Robin van Daalen
Bloomberg News
Cyclists pass an ABN Amro bank branch in Amsterdam earlier this year.
The effects of a slump in the Dutch housing market are spilling over to adjacent sectors, earnings from state-owned Dutch financial services group ABN Amro showed Friday.
But taking away uncertainty over the future of a homeowner tax break could help buck the trend, according to Gerrit Zalm, ABN Amro?s chief executive and the country?s former finance minister. However, potentially long and complex coalition talks after Sept. 12 elections could prolong the deterioration of the Dutch economy.
?The demand for mortgages has dropped enormously, so I think clarity about the future policy is important, even if in the view of the people that means a worsening,? Mr. Zalm said in an interview. ABN Amro on Friday reported a 15% drop in underlying profit for the first six months of the year as loan impairments rose to ?554 million from ?310 million a year earlier, especially due to losses on loans in the construction, retail and commercial real estate sectors.
?The slump isn?t on the whole, but [it] is fairly broad in everything that is related to construction and real estate,? Mr. Zalm said. ?With retail you see that especially everything linked to housing and construction is having trouble, because people aren?t moving as much. You see the effects at retailers in kitchens, furniture, window dressing etcetera, so you see a strong relapse in demand which causes considerable problems,? he added.
Despite the fact that ongoing uncertainty is hurting consumer confidence ? which is near a nine-year low ? and housing prices are tumbling at the fastest pace on record in July, Mr. Zalm isn?t too concerned that the housing crisis will lead to substantial losses on mortgages.
?The building industry hasn?t been so inflated as in Ireland or Spain,? Mr. Zalm explained. The Netherlands is ?a Calvinist country, so people want to meet their obligations and even at very bad times like the beginning of the ?80s, losses on mortgages were very, very limited. So I think the discipline to pay and meet your obligations is quite strong and paying your mortgage is high on the priority list.?
While clarity on the future of the tax break for homeowners might help kick-start the Dutch housing market and in turn lift consumer confidence, elections scheduled for Sept. 12 could leave an increasingly scattered political landscape, making talks to form a coalition government even more complex than in the past.
Unfortunately, Mr. Zalm didn?t have a quick fix for Dutch politics: ?It will be more difficult probably as the polls look now to create a cabinet, but that, I believe, is up to my political successors.?
Article source: http://blogs.wsj.com/source/2012/08/24/abn-amro-chief-sees-fix-for-dutch-housing-slump/
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