Housing in the Netherlands is popular with Germans.
According to a Capital Value survey of 40 of Germany’s major banks, German banks want to spend hundreds of millions of euros in Dutch leased property. Over the next few years, half of the banks polled say they aim to devote a higher amount of their budget to funding Dutch residential projects. The major reasons for these moves have been stated as stable rents and attractive returns. Furthermore, the growing demand for financing in the Netherlands, as well as greater competitiveness and available capital on the German financial market, play a key role. promotions
In the next years, budgets will be increased.
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Over the next few years, half of the banks polled say they aim to devote a higher amount of their budget to funding Dutch residential projects. Forty percent of the banks polled are already participating in the Dutch real estate sector. They’ve developed experience financing offices and retail properties over the last few years. 22 percent of these institutions have prior experience funding leased residences in the Netherlands.
According to Thijs de Graaf, a Capital Value researcher, “German banks and other international financiers’ increased interest demonstrates that the international capital market is inherently sensitive to cyclical tendencies. During the financial crisis, international banks dramatically reduced their funding activities. We will witness a return of these parties to the Dutch market now that the residential investment market is ramping up and available capital is expanding.”
A preference towards larger quantities
The majority of German banks are willing to fund portfolios worth hundreds of millions of euros. The minimum loan size is often between 15 and 20 million euros. As a result, the banks’ services are geared toward institutional clients and high-net-worth individuals. Several participants, particularly newbies to the market, are willing to finance lesser volumes as well. Banks from the Netherlands have always been involved in this market.
Increasing the amount of money available
The increased interest from German banks is attributable to a rise in the amount of capital accessible on the financing market. The Pfandbrief mechanism, which is employed in Germany, ensures that banks have access to a huge quantity of capital at low interest rates. The arrangement also ensures that German banks are able to provide loans at relatively favorable terms. The number of Pfandbrief loans for Dutch investments has surged in recent years, according to statistics (source: VDP Statistics, 2012–2013).
Apartments, particularly freshly constructed buildings in prime locations, are preferred.
The banks polled who are interested in financing Dutch leased dwellings have stated that they prefer to finance apartments. Unlike the Dutch rental housing market, the German rented housing market is mostly comprised of apartments, hence German banks have a better understanding of this product. The banks also suggest that they favor either newly built buildings or recently built properties (within the last five years) in particular.
The reasons for this desire have to do with the investment’s long-term viability and the resulting minimal maintenance expenses. Residential investments in prime locations, such as the Randstad conurbation or other urban areas with a tight or rising rental market, are preferred by banks. As a result, the financing preferences of German banks are consistent with those of international investors. This has also been demonstrated in recent transactions between German lenders and an overseas buyer.
A minimum of 50% financing is required.
German banks have stated that they are virtually always willing to fund more than half of a project’s total cost (loan-to-value ratio, or LTV). In general, a German bank would be willing to lend up to 68 percent of the investment value for houses in prime areas. Secondary areas have a much lower LTV ratio, with an average maximum LTV of 60%.
According to Marijn Snijders, Director of Capital Value, “I’m glad to see that, in addition to Dutch banks, German banks are showing interest in the Dutch property market. This trust is reflected in banks’ low DSCR (Debt Service Coverage Ratio) requirements. Over the last few years, we’ve witnessed an increase in interest from Dutch banks. The financing market is becoming more and more varied. The reason for this is that, in addition to German financiers, Anglo-Saxon financiers are becoming increasingly interested. Lower interest rates will result from rising interest and increased available capital.”