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Last bastion of property price rises sees severe downturn in last few months

Property prices, even in popular areas and Amsterdam's much sought after 17th century canal-side townhouses, have dropped for the first time since 1980, having doubled in the last ten years.

Average prices slipped 0.3% in the third quarter from the previous three months, according to Nieuwegein-based NVM, the Dutch Realtors Association. In the Amsterdam region prices fell 4%.

Prices may drop by as much as 10% in 2009 should the credit crisis worsen and buyers hold back, according to Peter Boelhouwer, a housing professor at Delft University.

Real estate agents say that the price fall is more severe than the official figures show. According to Gerard W. Bakker realtors prices in the most expensive parts of Amsterdam, the southern area of the city where the famous Vendel Park and Van Gogh Museum are located, have dropped 13%.

The Dutch have the highest mortgage debt in the euro area, at 98% of gross domestic product, almost double the European average. During the property boom of the last decade Dutch banks typically offered home buyers more than 4.5 times their annual salary for a loan worth up to 110% percent of the value of the property.

Now banks are tightening their lending and the number of mortgages granted fell 15% in the third quarter from the year-earlier period, according to the Dutch land registry.

'For younger people that want to buy a house for the first time, it's more difficult to arrange financing,' said Jan Dijkerman, a mortgage adviser at Huis & Hypotheek in Apeldoorn.

The Dutch economy is sliding into recession and Finance Minister Wouter Bos has said the economy may contract in 2009 for the first time in 27 years. This is having a knock on effect for property developers.

'I already see real-estate developers that can't get financing. This will lead to fewer new homes being built,' said Piet Eichholtz, a professor in real-estate finance at Maastricht University.