In the first six months of this year, total Dutch household spending was 1.1 billion down on the first half of 2007. The extra money allowed them to keep up their spending pattern and leave their personal capital intact.
Disposable income and consumption
Households: disposable income minus consumption
Personal capital used in 2003-2006
The situation was different in the period 2003–2006, when households spent more than they earned. They could afford it because their personal capital grew rapidly in that period due to positive equity mortgages and the value increase of the shares they owned.
Personal capital households
Positive equity homes
Positive equity on residential property was the largest additional source of finance for households in the period 2003-2006 enabling home owners to raise their mortgages to create extra capital for renovation, the purchase of a more expensive house or spend more money on consumer goods.
Positive equity on residential property has increased more than sixfold in 2007 to 694 billion euro and remains high in 2008, but the increase is less substantial as the growth rate of house prices slows down.
Reduction value share portfolio households
Loss of capital due to falling prices
The increase in the value of household investments was also a significant additional source of revenue in the period 2003-2006. The value of household investments increased from 117 billion euro in 1990 to 297 billion euro in 2007. When share prices plummeted in the first six months of this year, households faced an overall loss of approximately 22 billion euro.
Melanie Koymans and Jan Ramaker