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'Dutch mortgages are particularly attractive to foreign investors'

Daan Potjer

’Because of relatively high interest rates and low risk, Dutch mortgages are particularly attractive to foreign investors.'

In the coming years, the Netherlands will offer increasing latitude to large foreign investors who wish to finance new mortgages, says Daan Potjer, COO of Dynamic Credit in Amsterdam. ‘Increasingly, banks are withdrawing from the mortgage market and Dutch pension funds can only invest a portion of their portfolio in mortgages. This creates a gap that can be filled with foreign capital.'

'For years now, foreign investors have invested indirectly in the Dutch mortgage market. Until recently, that channel always ran via the banks. They gathered capital and made sure they could issue mortgages’, says Potjer. 'For all sorts of reasons, the large Dutch banks are now focusing primarily on the Dutch market and no longer have large international positions. A number of years ago, our company was one of the first enterprises to set up a direct channel between investors and consumers. We now see the demand and the necessity for foreign investors to invest in this channel as well. ‘Increasingly, banks are withdrawing and Dutch pension funds and insurance companies are stepping into that arena. The Dutch pension funds are starting to fill up. They can only place a certain portion of their portfolio in the mortgage market. Banks are facing changing capital requirements, along with the effects of laws and regulations. Therefore, that channel no longer functions as well as it used to. So there's room for foreign capital.'

Good payment ethic

According to Potjer, Dutch mortgages are particularly interesting, but it's not easy for a foreign investor to understand the market right away. 'Consider the conditions surrounding the National Mortgage Guarantee and the fact that you may finance 102% of the value of a home. As a mortgage recipient, it's also customary that you take along your own assessor, for example. As in: I expect you to give me a loan, but I'm gonna tell you what the value of the collateral is. But once you as an investor understand the Dutch market for mortgages, you become extremely enthusiastic. The repayment ethic among the Dutch is incredibly strong. Even during the economic downturn, mortgage losses were low. Pratically, every type of mortgage could be of interest, both in terms of maturities and of risk classes. This includes both the group of homes financed with a National Mortgage Guarantee and homes financed for 102% of their value. This latter would first appear to be risky, since you may finance only a maximum of 80% of the value of a home in many countries, for example. But when you consider the repayment ethic in the Netherlands and the tax regime, it quickly becomes another story in terms of risk spread. Good, independent information about this in English - like that on this website - helps in understanding this.'

Europe and Asia

At this moment, Dynamic Credit is especially noting particular interest in countries around the Netherlands such as Belgium, England and France. But there is also increasing interest from the US, Asia and the Middle East, especially because of the low interest-rate environment. The Netherlands still offers an attractive yield of between 2 and 2.5% interest on 10-year terms. We do note that it does take at least a year and a half of preparation to feel comfortable enough as an investor to actually invest in the Dutch market for mortgages. That's why that independent information, in English, is also so important.' According to Potjer, this must include, in particular, what the Dutch government's plans are for laws and regulations concerning the mortgage market. 'Speaking frankly: every change generates confusion. In addition, figures about the growth of the mortgage market, the average loan compared to the value of the house and general information about housing market developments are important. The numbers from the Central Statistics Bureau are also welcome. In short: transparency and clarity, in English, so that the risks to be run are clear.'