Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Households’ risks in the Dutch housing market:

Loan-To-Value and Loan-To-Income ratios

Arthur Denneman

Statistics Netherlands

Working Party on Financial Statistics OECD Paris, October 24th, 2011

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Outline

Loan-To-Value (LTV) and Loan-To-Income (LTI) Macro approach Data sources Subpopulations

LTV and LTI results Overview of some highlights (see paper for all results) Concluding remarks Micro approach: risk tables as new tool

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

LTV and LTI: macro approach

Macro approach, (sub)population considered as ‘one entity’ Loan = total home mortgage of main residences Value = total house value of main residences Income = total disposable income

In the Netherlands 7 million private households I 4 million owner-occupiers in NL

II 85% of owner-occupiers with home mortgage Household characteristics many subpopulations of

target populations I and II

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

LTV and LTI: data sources

Ministry of Finance / Tax authorities: all tax payers (7 million)

Home mortgage interest deduction from taxable income

income is increased by percentage of house value

long term saving plans in parallel of home mortgage

Income panel survey: 85 thousand private households

not only disposable income, also gross income etc.

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

LTV and LTI: subpopulations

- Age and origin of main breadwinner

- Size of household and household composition

- Number of persons with income in a household

- Main source of household income

- Income, house value, and equity categories (25% groups)

- Dwelling location: region and degree of urbanisation

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Loan-To-Income

Loan-To-Value The Netherlands, 2005-2009

0,4

0,5

0,6

0,7

2005 2006 2007 2008 2009

the ones with mortgage

all owner-occupiers

2,8

3,5

4,2

4,9

2005 2006 2007 2008 2009

the ones with mortgage

all owner-occupiers

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

0,0

0,3

0,6

0,9

1,2

Loan-To-Value

under 25 yrs

25 - 45 yrs

45 - 65 yrs

65 yrs and over

0,0

2,1

4,2

6,3

8,4

Loan-To-Income

Age of main breadwinner, 2009, all owner-occupiers

Age ↑ Mortgage ↓ (monthly payments) House Value ↑ (upward house prices)

Income ↑ (getting promotion / a rise)

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Origin of main breadwinner, 2009, all owner-occupiers

0,0

1,4

2,8

4,2

5,6

7,0

Loan-To-Income

0,0

0,2

0,4

0,6

0,8

1,0

Loan-To-Value

The Netherlands

Indonesia

Suriname

Turkey

When did they become citizen of the Netherlands?

Indonesia ±1950, Suriname ±1975, and Turkey starting from ±1970.

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Degree of urbanisation, 2009, all owner-occupiers

0,0

1,4

2,8

4,2

5,6

Loan-To-Income

0,0

0,2

0,4

0,6

0,8

Loan-To-Value

ExtremelyStronglyModeratelyHardlyNot

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Loan-To-Income

Loan-To-Value

0,0

0,2

0,4

0,6

0,8

1,0

House value Equity Income

1st 25% (low) 2nd 25% 3rd 25% 4th 25% (high)

0,0

1,4

2,8

4,2

5,6

7,0

House value Equity Income

1st 25% (low) 2nd 25% 3rd 25% 4th 25% (high)

2009 all owner-occupiers

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Concluding remarks

Dissemination at website of Statistics Netherlands:

- LTV and LTI for ± 100 (!) subpopulations annual data, starting from 2005

includes all kinds of reference data first release, hopefully, at end of this year

- LTI: not only disposable income, also gross income - not only macro approach, also ‘micro’ variables like median, 25% percentile, and 75% percentile

- new tool to interpret data: risk tables

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Risk table, all owner occupiers

2009, number of owner-occupiers

(x 1 million)

LTV categories  

0 0 – 0.5 0.5 – 1 >1 Totaal

LTI categories 0 0.7

  0 – 3.5 1.4

  3.5 – 7 1.4

  > 7 0.7

  Totaal 0.7 1.3 1.3 0.9 4.2

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Risk table, all owner occupiers

2009, number of owner-occupiers

(x 1 million)

LTV categories  

0 0 – 0.5 0.5 – 1 >1 Totaal

LTI categories 0 0.7       0.7

  0 – 3.5   1.1 0.3 0.1 1.4

  3.5 – 7   0.2 0.7 0.5 1.4

  > 7   0.0 0.2 0.4 0.7

  Totaal 0.7 1.3 1.3 0.9 4.2

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

Risk table, all owner occupiers

2009, 4.2 million owner-occupiers

(percentages)

LTV categories  

0 0 – 0.5 0.5 – 1 >1 Totaal

LTI categories 0 17%       17%

  0 – 3.5   25% 8% 1% 34%

  3.5 – 7   4% 17% 12% 33%

  > 7   1% 6% 9% 16%

  Totaal 17% 30% 31% 22% 100%

Utrecht, 20 februari 2009Haarlem, 10 maart 2009Statistics Netherlands

QUESTIONS ???