Dick Vos Senior Manager Research & Strategy!
House prices now falling at fastest rate since early 1990s House prices will fall 7% in 'uncertain' market IMF warns on global house prices House prices Through the floor House prices post record fall Traders predict house prices will fall by 50% in four years House prices: Market sliding faster than in the 1990s recession
2008 Q2 Annual % Growth Consumers Developers Investors Spain -0,3% Germany -2.5% Ireland -8.1% Denmark -9.6% Lithuania -9.9% UK -14,8% Estonia -16% United States -16.8% Latvia -24.1%? Local Authorities
Housing markets comparable to the excesses in stock prices? DOW 5/ 08-10/08-37% IT DOW 05/ 01-10/ 02-33% Credit Crunch IT AEX 05/ 01-10/ 02-66% Credit Crunch AEX 05/ 08-10/ 08-52% IT FTSE 12/ 00-3/ 03-50% Credit Crunch NIKKEI 07/ 08-10/ 08-47%
Sub prime; how it all began
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250.000 () * Average Price UK House Prices. Period Q4 1952 - Q3 2008 Source: Nationwide 184.131 Q3 2007 158.442 Nov. 2008 Reduction -14.8% Mortgages 6,1% in Q32007 to 6.0% in Q3 2008 200.000 Average Price 62.782 Q3 1989 150.000 100.000 50.000 0 50.128 Q1 1993 ' Reduction -20.1% Mortgages 12.9% in 88 via 14.9% in 90 to 6.9% in 92 Average Price 1.891 Q4 1952 Q2 2008 Q4 2006 Q2 2005 Q4 2003 Q2 2002 Q4 2000 Q2 1999 Q4 1997 Q2 1996 Q4 1994 Q2 1993 Q4 1991 Q2 1990 Q4 1988 Q2 1987 Q4 1985 Q2 1984 Q4 1982 Q2 1981 Q4 1979 Q2 1978 Q4 1976 Q2 1975 Q4 1973 Q2 1972 Q4 1970 Q2 1969 Q4 1967 Q2 1966 Q4 1964 Q2 1963 Q4 1961 Q2 1960 Q4 1958 Q2 1957 Q4 1955 Q2 1954 Q4 1952 New Houses Modern Houses Older Houses 1.853 Q4 1954 Reduction -2.0%
() * UK. "All Houses" Annual House Price Change in % Q4 1952 - Q3 2008 Source: Nationwide % change 50 40 30 + Q2 2008 Correction until 11/2008 : -14.8% Q4 2006 Q2 2005 Q4 2003 Q2 2002 Q4 2000 Q2 1999 Q4 1997 Correction until Q4 1954 : -2.0% Total correction: -20.9% Q2 1996 Q4 1994 Q2 1993 Q4 1991 Q2 1990 Q4 1988 Q2 1987 Q4 1985 Q2 1984 Q4 1982 Q2 1981 Q4 1979 Q2 1978 Q4 1976 Q2 1975 Q4 1973 Q2 1972 Q4 1970 Q2 1969 Q4 1967 Q2 1966 Q4 1964 Q2 1963 Q4 1961 Q2 1960 Q4 1958 Q2 1957 Q4 1955 20 % 10 0-10 -20 Q2 1954 Q4 1952
, +3.8% p.a. About 3x +2,5% p.a. 2018 2016 2014 2012 2010 2008 () * UK House Prices, Retail Prices and Earnings since 1952 Indices 1952=100 Sources: Nationwide and Measuring Worth 1995 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 12.000 10.000 8.000 6.000 4.000 2.000 0 1987 1970 House Price Index Retail Price Index Average Nominal Earnings Index
()- *./0 UK. First Time Buyer Gross House Price to Earnings Ratios Period Q1 1983 - Q3 2008 Source: Nationwide 6,0 5,0 4,0 Q2 1989 3,9 Q2-Q4 2007 5,4 4,7 3,0 3,2 2,0 1,0 0,0 2008 Q3 2007 Q4 2007 Q1 2006 Q2 2005 Q3 2004 Q4 2004 Q1 2003 Q2 2002 Q3 2001 Q4 2001 Q1 2000 Q2 1999 Q3 1998 Q4 1998 Q1 1997 Q2 1996 Q3 1995 Q4 1995 Q1 1994 Q2 1993 Q3 1992 Q4 1992 Q1 1991 Q2 1990 Q3 1989 Q4 1989 Q1 1988 Q2 1987 Q3 1987 Q4 1986 Q1 1985 Q2 1984 Q3 1983 Q4 1983 Q1! "#$$% & ' ( ) * + & ', '(
() *1234/45* UK. FTB Mortgage payments as a percentage of take home pay. Period Q1 1983 - Q2 2008. Source: Nationwide 160,0 140,0 1989: 140-148 2007: 123-137 120,0 100,0 80,0 60,0 40,0 20,0 0,0 Affordability is measured relative to the average in 1985 (=100) higher index values indicate worsening affordability Correction Q2 2008: 121 87 2008 Q1 2007 Q1 2006 Q1 2005 Q1 2004 Q1 2003 Q1 2002 Q1 2001 Q1 2000 Q1 1999 Q1 1998 Q1 1997 Q1 1996 Q1 1995 Q1 1994 Q1 1993 Q1 1992 Q1 1991 Q1 1990 Q1 1989 Q1 1988 Q1 1987 Q1 1986 Q1 1985 Q1 1984 Q1 1983 Q1
16$5*,,"7,' 8,,' #*09:84,,' 2003/04-June 2008 +22.5% +21.6% +78.3%! +76.9%! +22.9% +29.4% +87.4%! +44.7% -15.1%!
#;+'+<;++;,,"< GDP 6,0% 5,0% 4,0% 3,0% 2,0% 1,0% 0,0% -1,0% -2,0% 1988-2006 UK. Gross Domestic Product and House Prices. Percentage change on previous year. 1989-2007 1990-2008 1991-2009 1992-2010 1993-2011 1994-2012 1995-2013 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00% -5,00% -10,00% -15,00% House Prices Unemployment Rate 11,00% 10,00% 9,00% 8,00% 7,00% 6,00% 5,00% UK. Unemployment Rates and House Prices 1988-2006 1989-2007 1990-1991- 1992-1993- 1994-1995- 2008 2009 2010 2011 2012 2013 28,00% 25,00% 22,00% 19,00% 16,00% 13,00% 10,00% 7,00% 4,00% 1,00% -2,00% -5,00% -8,00% -11,00% House Price Changes 1988-1995 2006-2013 House Prices 1988-1995 2006-2013 House Prices UK. Average Nominal Earnings and House Prices. Percentage change on previous year. UK. Consumer Spending and House Prices. Percentage change on previous year. 10,00% 35,00% 10,00% 35,00% Earnings 9,00% 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1988-2006 1989-2007 1990-2008 1991-2009 1992-2010 1993-2011 1994-2012 1995-2013 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00% -5,00% -10,00% -15,00% House Prices Volume in consumer spending 8,00% 6,00% 4,00% 2,00% 0,00% -2,00% -4,00% 1988-2006 1989-2007 1990-1991- 1992-1993- 1994-1995- 2008 2009 2010 2011 2012 2013 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00% -5,00% -10,00% -15,00% House Prices 1988-1995 2006-2013 House Prices 1988-1995 2006-2013 House Prices
#;+'+<;++;,,"< Consumer Confidence Indicator -30-25 -20-15 -10-5 0 5 10 1-1-1989/2005 apr-89 jul-89 okt-89 jan-90 1-4-1990/2006 jul-90 okt-90 jan-91 apr-91 1-7-1991/2007 okt-91 jan-92 apr-92 jul-92 1-10-1992/2008 jan-93 apr-93 jul-93 okt-93 jan-94 apr-94 jul-94 okt-94 jan-95 apr-95 jul-95 okt-95 jan-96 apr-96 jul-96 okt-96 jan-97 apr-97 jul-97 okt-97 1989-1997 2005-2008 Industrial Confidence Indicator -50-40 -30-20 -10 0 10 20 1-1-1989/2004 apr-89 jul-89 okt-89 1-1-1990/2005 apr-90 jul-90 okt-90 1-1-1991/2006 apr-91 jul-91 okt-91 1-1-1992/2007 apr-92 jul-92 okt-92 1-1-1993/2008 apr-93 jul-93 1-10- jan-94 apr-94 jul-94 okt-94 jan-95 1989-1995 2004-2008 Retail Trade Confidence Indicator -40-30 -20-10 0 10 20 30 1-1-1989/2004 apr-89 jul-89 okt-89 jan-90 1-4-1990/2005 jul-90 okt-90 jan-91 apr-91 1-7-1991/2006 okt-91 jan-92 apr-92 jul-92 1-10-1992/2007 jan-93 apr-93 jul-93 1-10-1993/2008 jan-94 apr-94 jul-94 okt-94 jan-95 apr-95 jul-95 okt-95 jan-96 apr-96 jul-96 okt-96 jan-97 apr-97 jul-97 okt-97 1989-1997 2004-2008
() *= 1* () ***>* UK House Prices, Retail Prices and Earnings since 1952 Indices 1952=100 Sources: Nationwide and Measuring Worth 12.000 10.000 8.000 1995 October 2007 November 2008: -14,8% 2007-2011/2012: -19% 6.000 1987 +3.8% p.a. 4.000 2.000 1970 About 3x +2,5% p.a. 0 2018 2016 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 House Price Index Retail Price Index Average Nominal Earnings Index
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10,00% *?#$ 8,00% UK. Development House Prices versus Volume Growth Consumer Spending. Period 1980-2009 6,00% 4,00% 2,00% 0,00% -2,00% -4,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00% -5,00% -10,00% -15,00% ' 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 Consumer Spending House Prices Consumer Spending House Prices
?#$0**. + share U.K. Development share of consumer spending in total GDP and real growth rates consumer spending and GDP. Period 1980-2009 growth 64,0% 62,0% 60,0% 58,0% 56,0% 54,0% 52,0% 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 9,0% 7,0% 5,0% 3,0% 1,0% -1,0% -3,0% Share Consumer Spending GDP
6,0 5,0 4,0 3,0 2,0 0**. ($4 UK. Relationship growth GDP and growth Unemployment. Period 1981-2008 1,0 0,0-1,0-2,0 4,0 3,0 2,0 1,0 0,0-1,0-2,0-3,0, 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 GDP Unemployment 2,4% GDP Hurdle Rate Unemployment Rate
($45* UK. Relation Unemployment Rate and the development of the Compensation Rate in the Private Sector. Period 1978-2008. 20,00% 18,00% Correlation negative 0,50 16,00% 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00% 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 Unemployment rate Compensation rate private sector
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2 A * The Netherlands. House Prices. Period Q1 1970 - Q3 2008. Sources: CBS and NVM Mortgage Rate 5,8% Q3 2008 252.000 Mortgage Rate 7,7% Q2 1978 89.079 Mortgage Rate 11,6% Q4 1982 57.993 Mortgage Rate 10,1% Q1 1999 Q1 1998 Q1 1997 Q1 1996 Q1 1995 Q1 1994 Q1 1993 Q1 1992 Q1 1991 Q1 1990 Q1 1989 Q1 1988 Q1 1987 Q1 1986 Q1 1985 Q1 1984 Q1 1983 Q1 1982 Q1 1981 Q1 1980 Q1 1979 Q1 1978 Q1 1977 Q1 1976 Q1 1975 Q1 1974 250.000 200.000 150.000 Euro 100.000 50.000 Mortgage Rate 8,2% Q1 1970 23.519 0 Q1 2008 Q1 2007 Q1 2006 Q1 2005 Q1 2004 Q1 2003 Q1 2002 Q1 2001 Q1 2000 Q1 1973 Q1 1972 Q1 1971 Q1 1970
50,00% 2 A * 40,00% The Netherlands. "All Houses" Annual House Price Change in % Period Q1 1971 - Q3 2008 Source: CBS and NVM 30,00% 20,00% 10,00% 0,00% -10,00% -20,00% Q3 2008 Q2 2007 Q1 2006 Q4 2004 Q3 2003 Q2 2002 Q2 1978-Q41982-35% Q1 2001 Q4 1999 Q3 1998 Q2 1997 Q1 1996 Q4 1994 Q3 1993 Q2 1992 Q1 1991 Q4 1989 Q3 1988 Q2 1987 Q1 1986 Q4 1984 Q3 1983 Q2 1982 Q1 1981 Q4 1979 Q3 1978 Q2 1977 Q1 1976 Q4 1974 Q3 1973 Q2 1972 Q1 1971
2 A * 1200 1100 1000 The Netherlands House Prices, Retail Prices and Earnings since 1965. Indices 1970=100 Sources: CBS and NVM Mortgage Rate Mortgage 5,8% Rate 3,7% +7,0% pa 900 800 2,9x 700 600 500 400 Mortgage Rate 8,2% Mortgage Rate 9,0% Mortgage Rate 7,7% Mortgage Rate 10,1% Mortgage Rate 8,1% 1970 1976 1978 1982 1992 +5,1% pa +3,7% pa 1,4x 300 200 100 0 Mortgage Rate 11,6% 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 1965 House Prices Consumer Price Earnings
2 A - *AA5* The Netherlands. First Time Buyer Nominal House Price to Nominal Net Income ratios. Period 1970-2008 Source: BIS 9,00 8,00 7,00 6,00 5,00 4,00 1978: 6,1 1983: 3,4 5,0% Mortgage Rates 5,5% 4,9% 5,8% 7,2% 3,7% 2008: 7,7 5,6% Long-term average 4,9 Average 70-00: 4,3 3,00 2,00 1,00 0,00 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970
2 A *4 " Number of new loans and Interest Payments as % of disposable income. Period 1970-2002. Source: CBS 800.000 700.000 600.000 500.000 1978: 47,5% 1975: 33,9% 1981: 50,9% 1986: 22,0% 2002: 38,4% 60,0% 50,0% 40,0% 2008: 47,7% 400.000 30,0% 2005: 28,8% 300.000 200.000 100.000 20,0% 10,0% 0 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 Number % 0,0%
/45B ' Affordability = ( R M I ) T R = average mortgage rate on new mortgages M = average mortgage T = average tax shield on interest I = (net) disposable income
220,00 210,00 200,00 190,00 180,00 170,00 160,00 150,00 140,00 130,00 120,00 110,00 100,00 90,00 80,00 70,00 /45B + The Netherlands. Affordability Index. Period Q1 1970 - Q2 2008 Base year 1985=100 Q2 1978: 209,94 Q2 1980: 210,85 Q2 2008: 198,60 Q4 2008 Q3 2007 Q2 2006 Q1 2005 Q4 2003 Q3 2002 Q2 2001 Q1 2000 Q4 1998 Q3 1997 Q2 1996 Q1 1995 Q4 1993 Q3 1992 Q2 1991 Q1 1990 Q4 1988 Q3 1987 Q2 1986 Q1 1985 Q4 1983 Q3 1982 Q2 1981 Q1 1980 Q4 1978 Q3 1977 Q2 1976 Q1 1975 Q4 1973 Q3 1972 Q2 1971 Q1 1970
0**#+"<+'++'<, The Netherlands. GDP 1971-1985 versus GDP 1998-2012. Sources: CBS and Consensus Forecasts 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00% -1,00% -2,00%, Correlation positive 0,50 1985-2012 1984-2011 1983-2010 1982-2009 1981-2008 1980-2007 1979-2006 1978-2005 1977-2004 1976-2003 1975-2002 1974-2001 1973-2000 1972-1999 1971-1998 1970-1980 1998-2012
1200 2 A **C* The Netherlands House Prices, Retail Prices and Earnings since 1965. Indices 1970=100 Sources: CBS and NVM Scenario 78-83 2008-2013: -42,5% 1100 1000 900 800 +3,0% pa 700 600 500 400 300 200 100 0 +2,5% pa 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 1965 House Prices Consumer Price Earnings
*??* The Netherlands. Relationship House Prices and Consumer Confidence Indicator. Period 1992-2008 30 20,00% 25 18,00% 20 16,00% Conficence Indicator 15 10 5 0-5 -10-15 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 November 2008 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% Growth House Prices -20 0,00% Consumer Confidence Indicator House Prices
6,00% *?#$ 5,00% The Netherlands. Nominal development House Prices versus Volume Growth Consumer Spending. Period 1980-2008 4,00% 3,00% 2,00% 1,00% 0,00% -1,00% -2,00% -3,00% -4,00% 20,00% 15,00% 10,00% 5,00% 0,00% -5,00% -10,00% -15,00% -20,00% 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 Consumer Spending House Prices Consumer Spending House Prices
?#$0**. Growth 6,00% 5,00% 4,00% The Netherlands. Development share of Consumer Spending in total GDP and Real Growth Rates Consumer Spending and GDP. Period 1980-2008 56,1% 46,3% Share 60,00% 50,00% 3,00% 2,00% 40,00% 1,00% 30,00% 0,00% -1,00% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20,00% -2,00% 10,00% -3,00% -4,00% 0,00% Consumer Spending GDP Share Period 1981-2008 : Correlation Consumer Spending and GDP rates positive 0,80
0**. ($4 The Netherlands. Relationship GDP and Unemployment. Period 1988-2008 Growth GDP 5,00% 4,50% 4,00% 3,50% 3,00% 2,50% 2,00% 1,50% 1,00% 0,50% 0,00% 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00% Unemployment Rate 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 GDP Unemployment Period 1988-August 2008. Correlation House Prices and Unemployment Rates negative 0,32
($46$5* The Netherlands. Relationship Unemployment Rates and Annual Growth Rates Disposable National Income. Period 1970-2007 18,00% 16,00% Period 1970-2007. Correlation Growth Rates Disposable National Income and Unemployment Rates negative 0,73 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00% 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 Unemployment Rate Disposable Income
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