The three biggest banks in The Netherlands have set aside enough money to cover their troubled commercial property loans, claims a new a report ahead of a European banking review due to be published later this year.
The Dutch central bank — which audited the portfolios of ING Groep NV, Rabobank Group and ABN Amro Bank NV — said, in a letter to the Dutch parliament, that it was confident all three lenders had made sufficient provisions to absorb any future losses. Each of the three banks had ring fenced between six and nine per cent of their total loan portfolios, worth more than €70bn (£58bn) in total.
All of Europe’s major banks are cleaning up their balance sheets ahead of a well publicised financial health check by the European Central Bank later this year. Like most central banks, the Dutch institution has been advising its most affluent lenders to address and rectify any potential weaknesses. As part of that “advice” the Dutch central bank ordered the country’s largest banks to build up bigger capital cushions for potential losses on commercial-property loans.
The commercial real estate market in the Netherlands was hit hard by the economic downturn and is still struggling with high property vacancy levels and falling values. Any recovery has been made worse by a chain of bankruptcies among property developers and construction firms, resulting in a sharp increase in loan losses.
There are definite signs, however, that the Dutch property sector is returning to health. Investment in the country’s commercial property market will reach between €3.5bn and €4bn (£2.8bn and £3.3bn) this year, according to Savills’ latest Market in Minutes report. The total for the whole of 2013 was €3.4bn (£2.8bn).
The 2014 figure is also expected to be boosted by better than expected retail deals. The first few months of this year saw more than €600m (£497m) worth of investment in the retail market, far outstripping the €615m (£509m) for all 12 months of 2013.
“Interest in Dutch real estate has significantly increased over the past 12 months, both from overseas and domestic buyers,” explained Clive Pritchard, head of Savills in The Netherlands. “The prime office investment market in Amsterdam was particularly strong in 2013, however as available supply diminishes, we expect buyers to turn increasingly towards prime assets in the other major cities and non-core offices in the capital.”
Pritchard says the driving forces behind the growth in the commercial property market are the general increase of capital flowing towards property markets, competitive pricing of Dutch properties — both for prime investments and value-added and speculative building — and the growing willingness of owners to dispose of non-performing assets.
Broken down by sector, the report says that retail demand rose to 370,000sq metres in 2013, up from 280,000sq metres in 2012, and mainly due to international fashion retailers moving into The Netherlands. Industrial demand grew slightly by 2.6 per cent to 2.47m square metres last year. But the demand for office space decreased to 1.15m square metres, down from 1.30m the year before, and with the majority of lettings being located within the Randstad, an area made up of Holland’s four biggest cities: Amsterdam, Rotterdam, The Hague and Utrecht.
