Quote:
Originally Posted by speakingtohe
Still many people live far beyond their means or pretty close to the edge with a lot more. Is everyone frugal in the Netherlands? No cars or houses repossessed or credit card debt out of control?
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Many Dutch people are quite wary of credit cards; many people don't have one. I do, but I only use it as a last ditch resort, if I don't have any other way to pay.
The one thing that many Dutch people seem to do however, is buy houses that they can just barely afford, as they include tax benefits in their income. This has driven prices upward.
One example is HRA (hyptheekrente-aftrek). It is a tax benefit intended to make it easier for people to buy a house. For example: you can afford a €200K house, and you'll be able to live OK, if you don't do extra's. Through the benefit, you get some extra money, so you can live somewhat more easily; this was done to encourage people to buy more houses.
However, many people used this benefit as budget/expected income, and in doing so, they can suddenly afford a €240K house. Instead of living more easily, they're going to live bigger/more expensive. So, a €200K house has suddenly risen €40K in price.
This has been happening for some time.
Some people have gone so far that they put themselves into the situation that two people in the household need to work above minimum wage, and all tax benefits must stay constant; should one salary be lowered, or one of the benefits fall away, then these people may get into trouble.
This is the reason why the Dutch government is struggling to abolish HRA: they want to get rid of it, because it is actually mis-used, by rich people buying houses and deducting a lot of taxes, and because it's artificially inflating house prices for a long time. However, if they would drop it all at once, many people would get into great trouble, because they actually
NEED the HRA to pay their morgage; something HRA was never intended for.
In short: HRA was used by many people not to live a bit easier in a house they could afford, but to buy a house they couldn't otherwise afford (or, buying their house at a price it wasn't actually worth).
This, at this point in time, is one of the biggest problems in the Netherlands, causing many economical problems. (Housing market is stuck, mobility of people for work purposes is low, house prices are deflating, which makes it impossible to sell, and so on.)