Nov. 24 (Bloomberg) -- Inge Fransen last month cut the asking price for her house in the Netherlands by 11 percent, as one of the final holdouts in Europe’s housing boom capitulates.

“I’m concerned the whole market will come to a halt,” said Fransen, 45, who now wants 339,000 euros ($432,670) for her five- bedroom home in Zwanenburg, a town built on land reclaimed from the water seven miles from Amsterdam. “Everyone will stay put, not buying or selling.”

Eighteen months after real-estate markets in Spain and Ireland began to sputter, the Netherlands is following suit. Prices of properties including 17th century Amsterdam canal-side townhouses dropped in the third quarter for the first time since 1980 after doubling in the last decade.

The boom has left the Dutch saddled with the highest level of mortgage debt in the euro region just as the economy slides into a recession. As recently as the second quarter, the Netherlands was the only euro-area country among 11 surveyed by the Global Property Guide with rising property prices.

“In September, everyone still said the Dutch housing market would never fall,” said Klaske Woolthuis, 32, a communications adviser, who has been looking for a house outside Amsterdam for 18 months. “Now you see this changing. It’s becoming more of a buyer’s market.”

Average prices slipped 0.3 percent in the third quarter from the previous three months, according to Nieuwegein-based NVM, the Dutch Realtors Association. In the Amsterdam region, where narrow houses loom over canals winding through the city center, prices fell 4 percent to an average 265,000 euros.

More Declines to Come

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

Irish real-estate prices have fallen 15 percent from their peak in 2007. In Spain, the collapse of the housing boom will leave about 930,000 new homes unsold by the end of this year, according to valuation company Tasaciones Inmobiliarias SA.

While the Dutch housing market was initially cushioned by the euro area’s lowest jobless rate, consumer sentiment waned after the government was forced to rescue the Dutch units of ABN Amro Holding NV and Fortis on Oct. 3.

The government also came to the aid of Aegon NV and ING Groep NV with capital injections.

With the ripples of the financial crisis spreading, the Dutch economy may contract in 2009 for the first time in 27 years, Finance Minister Wouter Bos said on Nov. 12.

‘Bad News’

Prices of houses in the most expensive part of Amsterdam, the southern district in which the Vondel Park and the Van Gogh Museum are located, dropped 13 percent in the third quarter from the previous three months, according to a quarterly report compiled by Gerard W. Bakker realtors.

“People are confronted with bad news on television,” said Charles Kalshoven, the chief economist at ING’s Postbank unit in Amsterdam. “They get more cautious.”

The number of houses sold in the third quarter fell 13 percent from the previous three months, NVM said. Sales took 75 days on average, an increase of 6 percent compared with the year- earlier period.

“There is much less pressure on buyers, you can take more time to think,” said Charles Grayson, 42, a real-estate broker in Amsterdam who mainly caters to expatriates. “A year ago, you’d very often have to decide within a day.”

Mortgage Debt

Record-low interest rates between 2003 and 2005, tax breaks and competition between lenders helped fan the boom.

The Dutch have the highest mortgage debt in the euro area, at 98 percent of gross domestic product, 2006 data from the European Mortgage Federation showed. That’s almost double the European average.

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, allowing borrowing for renovations.

Banks are tightening their lending, said NVM spokesman Roeland Kimman. The number of mortgages granted fell 15 percent 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. “There’s more choice, but that doesn’t help if you can’t get a mortgage.”

‘Can’t Get Financing’

The combination of being one of the most densely populated countries in Europe and a drop in supply of new homes may limit price declines. The number of new homes will fall 8.5 percent next year from around 80,000 this year, the Amsterdam-based Economic Institute for Construction has forecast.

“I already see real-estate developers that can’t get financing,” said Piet Eichholtz, a professor in real-estate finance at Maastricht University. “This will lead to fewer new homes, and possibly even higher prices as supply shrinks.”

That’s little comfort to Inge Fransen. She planned to use her house-sale proceeds to pay off loans on the family fishing store in the Amsterdam district of Osdorp.

“If we had known in advance, we’d have put the house up for sale a year earlier and sold in no time,” said Fransen.

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net; Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net

Last Updated: November 23, 2008 18:01 EST