Dutch house prices are expected to fall by at least another 7%  on the back of a deteriorating macro-economic environment, said Fitch Ratings in a report today.

Such a decrease would put house prices at 18% below their 2008 peak levels and about the same level with their 2004 prices.

The rating agency had originally forecasted a 15% decline, but rising unemployment rates, as well as a likely reversal of government support means that the prices will decline further.

Fitch said in its report that tax deductible mortgage interest payments are likely to be gradually phased out as the Dutch government looks to reduce its budget deficit to 3% from 4.8%.

"Our forecast is based on the assumption that changes to the tax treatment will be phased in gradually," analysts noted.  "If government action was more drastic, it could lead to a further revision."

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