Wealth in the Netherlands is growing, but only for those who...

It remains unevenly distributed in the Netherlands. At the end of 2018, one percent of households owned almost 24 percent of the total assets of houses, businesses, investments and savings, minus debt. They owned 365 billion euros. The total wealth of all households together is EUR 1.540 billion.

These figures, which the Central Bureau of Statistics published last week, are for 2018. The figures are derived from individual tax returns. According to chief economist Peter Hein van Mulligen of Statistics Netherlands, this origin partly explains the high degree of wealth inequality in the Netherlands compared to many other countries. There the numbers are based on surveys and people, especially those with great wealth, sometimes underestimate their wealth. Consciously or unconsciously.

What is striking about the new figures? To begin with, Dutch households are getting richer. An average household owned nearly 50,000 euros at the end of 2018, 12,000 euros more than a year earlier.

An average household owned nearly 50,000 euros at the end of 2018, 12,000 euros more than a year earlier

The richest 1 percent is also getting richer. But at the same time inequality is slowly decreasing. In 2013, at the low point of the housing market during the previous crisis, the 1 percent richest households owned 27.6 percent of total wealth. In 2018 ‘only’ 23.7 percent.

This is due to the increase in house prices. Almost 60 percent of households own their own home. For most people, this is their most important asset, in addition to pension plans. But the CBS does not count pensions.

Also read this background:Predict house prices? That is ‘informed gambling’

If house prices rise, as has been the case continuously since June 2013, the wealth of more than four million households with their own homes will rise with them. Together these households form a steadily growing asset block. The houses of the very rich are also getting more expensive, but for them a house is only a small part of their wealth.

So, if you look at their total assets, they benefit much less from the price increase. The bulk of their assets reside in their own business. The large middle class of homeowners, who are not super rich, but also not poor, makes the wealth distribution somewhat more equal. “Rising house prices have a leveling effect,” confirms Van Mulligen. House prices are still rising. At least, since the end of 2018, the measuring point of the CBS capital figures, prices have increased by another 13 percent. Add to that the new construction and the value of owner-occupied houses is approaching 1,700 billion euros.

The leveling effect is also reflected in the slow decline of an internationally widely used measure of inequality, the so-called Gini coefficient. That measure is between 0 and 1. A coefficient of 0 means total equity equality, a result of 1 means: one person owns everything. In the Netherlands, the Gini fell from over 0.8 (2014) to 0.76 (2018).

The good news will end there. What’s the downside? To begin with, the Netherlands remains a country with an unequal asset distribution internationally.

A second comment concerns the overheating of the housing market, as the usually cautiously formulated Nederlandsche Bank plainly calls it. Financial regulators are increasingly concerned about speculative bubble blowing. Last week, the central bank noted in its semi-annual review of financial stability that more and more home buyers and owners are borrowing the maximum amount relative to their income. If that later falls or disappears during the crisis, there will be little or no financial scope to absorb setbacks.

Ultralage rate

An important factor for the overheating, in addition to the scarcity of owner-occupied houses in the Randstad, is the ultra-low interest rate of the European Central Bank, which should promote economic growth and inflation.

The third comment concerns people who do not have their own home. Statistics Netherlands figures indicate growing wealth, but they coexist with growing debt problems. The SchuldenLab, a think tank led by former ABN Amro CEO Gerrit Zalm who wants to reduce debt (worries), fears a debt explosion in the corona crisis. Now a million Dutch people are struggling with problematic debts. Hundreds of thousands may be added by the contraction of the economy, such as self-employed people and entrepreneurs in small and medium-sized businesses.

The fourth comment concerns inequality between generations. That in itself has an inexorable logic. Older people have enjoyed an income all their lives and have been able to save and pay off the debt on a home that they own. Young people increasingly have a student debt.

Under the age of 25, the average capital is zero, according to the figures for 2018. In the age group between 25 and 45 years, the average capital is 16,700 euros. Above 65, that is 142,600 euros.