Standard & Poor’s said in a report today that despite the weakening credit fundamentals for Dutch RMBS, collateral pools to date remain broadly stable.
Dutch RMBS has historically been one of the best performing sectors in European securitization but deteriorating macroeconomic and housing market conditions has put pressure on this asset class.
Data from the Dutch statistics office last week showed that house prices declined again in April to reach a 10-year low.
Prices are now down 19% since their 2008 peak, and we expect them to decline by 3% by year-end 2013, and by 1.0% next year.
Macroeconomic difficulties and the implementation of mortgage market reforms could continue to drag down Dutch house prices in the short term. In the long term, however, property shortages could support house price growth.
By year-end 2013, S&P expects overall Dutch property prices to decline further by 3%, and by another 1% in 2014. This would increase the cumulative house price decline to about 23% from its 2008 peak.
The ratings agency said that Dutch RMBS have so far weathered the harsher market condition “due to relatively generous unemployment benefits, which likely introduce a significant lag between rising unemployment and rising mortgage arrears.”
“In the short term, austerity measures (including cuts in pension and unemployment benefits), rising unemployment, and various mortgage market reforms may weigh on property prices and transaction volumes,” said analysts in the S&P report.