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Friday, 12 April 2013

Ernst’s Economy for You in discussion at the Smart Talk Sessions

Last Tuesday, 9 April 2013, I had the privilege of being present at the monthly held 'Smart Talk Sessions' in the city theater 'Stadsschouwburg' in Amsterdam, The Netherlands.

Stadsschouwburg Amsterdam,
Picture copyright of; Ernst Labruyère
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These sessions were organized and hosted by the star presenters Paul van Liempt, Petra Grijzen and Lars Sörensen of Dutch news radio station BNR (

Paul van Liempt,
Picture copyright of: Ernst Labruyère
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Petra Grijzen,
Picture copyright of: Ernst Labruyère
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Lars Sörensen,
Picture copyright of: Ernst Labruyère
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In contrary to BNR Newsroom, where I have been present for a number of times, the Smart Talk Sessions were no semi-live radio broadcast.

The purpose of the evening was to have razor-sharp public discussions on one topic with some of the brightest minds in the business, just for the sake of discussing, learning and networking.

Tuesday’s topic was the Dutch Commercial and Residential Real Estate markets (CRE/RRE), which have both been in distress since 2006/2007.

Guests of the evening were:
  • Ger Hukker, chairman of the Dutch association of real estate agents ‘NVM’;
  • Rudy Stroink, ‘crashed, burned and uprisen’ real estate entrepreneur, formerly of Trammell Crow Netherlands (TCN);
  • Kees Jan Verplanke, co-founder of real estate auction and mediation company;
  • Kees de Kort, brilliant macro-economist and economic commentator of BNR. Kees is 'Holland's favorite perma-bear’; 

It was a fruitful evening for the objective listener. Ger Hukker, the chairman of the realtors and optimist-by-vocation started the discussion with Rudy Stroink, the former managing director of TC Netherlands.

Rudy Stroink shared his first-hand experience on the rise and fall of a Commercial Real Estate company (CRE) in ‘the wild zeroes‘. 

Rudy Stroink (formerly TCN),
Picture copyright of: Ernst Labruyère
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TC Netherlands had its heyday in the booming years of the Dutch CRE market before 2007. In those days, the banks, the municipalities and the project developers were all in the grip of ‘bigger, higher and more prestigious’ Commercial Real Estate. The sky was not the limit, but only the beginning.

The interest on loans and credit lines was ridiculously low in those years and risk awareness was so minimal, that the banks themselves almost delivered the wheelbarrows to take the stock-piles away, formed by multi-million euro loans

For TCN and other large project developers and investors in CRE, it had been a nice, wild ride, as long as it lasted. Everything changed when the CRE-market started to slump in 2007 and things got far worse when the credit crisis gained momentum at the end of 2008.  

The unavoidable end for TCN (and many other project developers) came in 2012, when the company defaulted, leaving an unfinished debt of €70 million behind. Rudy Stroink and many others learned a lesson the hard way in those days.

Ger Hukker of NVM spoke about the extremely difficult situation on the Dutch housing market, where there seems to be no light at the end of the tunnel yet. Many real estate agents saw their business decline or even totally disappear, leaving them no other option, then defaulting.

Ger Hukker, NVM
Picture copyright of: Ernst Labruyère
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He and Stroink pointed at the many errors that had been made in the Dutch residential real estate market:
  • The excess mortgage loans to private citizens (sometimes seven times the yearly income), due to the ubiquitous optimism, the very low interest rates and the even lower risk awareness in The Netherlands;
  • The lifestyle of conspicuous consumption among the Dutch citizens, who thought that excess debt was no problem whatsoever, until it became one in 2008;
  • The central government with their fuzzy policies:
    • Initially, the central government was kicking the can down the road, while everybody and their sister already saw that the Dutch housing market was an accident, waiting to happen;
    • Subsequently, the cabinet has been looking for one pseudo-solution after another, while still ignoring the real solution: price and debt destruction;
  • The banks, which lended numerous excess mortgages. The same banks that are still unwilling to take their losses on their CRE and RRE portfolios, but instead persist in their opinion that ‘the emperor does have clothes on’, when it comes to the Dutch housing and CRE market;
  • The greed of the Dutch municipalities, who treated every piece of building ground, like it was pure gold and whose appetite for income from building activities has been unsatisfiable during the last decade.

    These building grounds were sold for absolute peak prices until the Dutch house-buyers said: ‘enough is enough’.
     Since then, municipalities got stuck with acres and acres of unsold building ground, which weighs heavily on their balance sheets; 

Kees de Kort coloured the discussion with his sometimes obstinate comments and his bright views on macro and micro economics and behaviour of citizens: 
  • Initially, when their future looked bright, there was total risk unawareness among the Dutch citizens. These took excess mortgages without blinking with their eyes, aided by the large Dutch banks, which had only dollar signs in their eyes. 

  • Today, risk awareness is total, as everybody is afraid for his job, his soaring household expenses and taxes and his dimishing investments and savings.

    This risk-averse behaviour leaves the Dutch housing market in an almost totally stalled situation, in which almost every buyer waits for housing prices to drop further and further, while sellers don't want to lower their prices, due to their risk for residual debt.

Kees de Kort en Kees Jan Verplanke
Picture copyright of: Ernst Labruyère
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The tenor of the evening was not very optimistical. Hukker, Stroink and De Kort and the  presenters all agreed that there was little to be done about the process of price and debt destruction in the Dutch housing market.

People are keeping their hands in their pockets and wait for prices to drop further, while housing sellers are very reluctant to sell their houses at a lower price, due to the risk for large residual debt. The banks on their behalf are very reluctant to valuate their housing portfolio ‘marked-to-market’, due to the financial downside risks of such an operation for their solvability and perhaps even liquidity.

The Dutch CRE market is currently critically ill, with a substantial overcapacity and (mostly structural) vacancy of 17%, out of total office space. There are no easy solutions whatsoever. There are just too many office and small business buildings in The Netherlands and local governments maintained building new office space for much too long.

Some office buildings can still be sold as-is, other buildings can be sold or rented after a refurbishing operation. However, there is also a large part of those vacant buildings that will remain vacant for eternity. Especially Stroink pointed out that this can become a societal problem, due to the bill for these vacant buildings. 

At any given moment, this bill will land at the Dutch tax-payers. Also the consequences of pauperization of vacant buildings and industrial zones should be incorporated, as these could lead to petty criminality and unsafe situations.

On the other hand, there was also a glimmer of hope for the Dutch CRE market. This came from the very young (22 years), but gifted entrepreneur Kees Jan Verplanke.

He and a few friends from university started (i.e. ‘rental bids’). 

This is not an auction site for CRE in the true sense of the word, where people must make irrevocable offers on real estate, in which they are interested. 

Instead, Huurbieding is a site where interested buyers and would-be renters of real estate can make an informal offer for the CRE of their choice.

Subsequently, this offer can be the starting shot for negotiations between sellers and buyers or tenants and landlords for office space. Thus, Huurbieding already helped many sellers and buyers to come together in the Rotterdam region.

All guests and even Ger Hukker of NVM, the realtors organization and a direct competitor of Huurbieding, could appreciate the bold, successful approach of these young entrepreneurs and the transparency that this startup brought to the opaque CRE-market. In this market, actually earned rental and sales prices of sold/rented buildings had been ‘the best kept secret’ in the business.

Summarizing, the Smart Talk Sessions have been an evening well-spent with fierce, but good discussions and an involved and interested crowd.

It may be a disappointment for many visitors and for my readers that even these experts didn’t have a straight-forward solution for the crisis that the Dutch CRE and RRE markets are in currently, other than price and debt destruction.

However, everybody agreed that the Dutch central and local governments must get their act together, in order to not let the Dutch housing and CRE market further slide away. For the rest, this crisis will pass too!

One last comment: 

I endorse the Smart Talk Sessions and the people who are organizing it. I don't earn any money or favors with this endorsement.

The Smart Talk Sessions are totally free, except for a few hours of your precious time. I found it a wonderful experience and I am planning to also visit the next Sessions. 

I hope you do this too, when you are in The Netherlands on the 14th of May. You won't regret it. 

Registering is possible at: 


  1. The Dutch 'housing market' is not a free market. The central or local government have essential means of production at their disposal - building ground, building permits - and use them to regulate and control the 'market'.

    For 20 years on a row, the production of new houses has been (much) lower than formally intended. That is no accident - it is conscious stalling, and hence wilful creation of a shortage on the 'market', driving up the house prices.

    Local governments are not concerned with building houses for people who want or need houses; they are concerned with making as much money as possible from the housing market, mistaking their own financial interest for the real public interest of Dutch citizens.

    The idea of the Dutch government and many owners of what a 'healthy market' is, apparently includes price increases, while excluding prices decreases. The price has gone up 300%, but no one seems ready to accept a decrease of 30%.

    You assert that these prices rose "until the Dutch house-buyers said: ‘enough is enough’". I don't think they said this. The pricec have increased up to the point that buyers cannot afford them any longer, and the financial crisis evidently limited their budget. Starters simply *cannot* pay 250.000 (550 guilders) for a three room apparment anymore. They would if they could, but they cannot because the bank doesn't allow them - and that is a good thing. It is not a wilful decision on behalf of the buyers.

    I think the only way to a sanitization of the Dutch housing market consists of three painful but congruent steps: lowering prices, restarting the production of new houses (good for the building sector), and a reorganization of the tax system that allowed, or actually stimulated, house prices to burst.

    Houses are meant to live in, not to make money from.

  2. Just some small factoids from a local government worker:

    - local governments got building quota from The Hague. Pre-2008 they were told to build houses.
    - the local governments bought up farmland ar fairytale prices that they needed for this task. They also bought land to develop industrial estates. All with the hope of making serious money by selling to project developers and private persons.
    - then the crisis hit in 2008. The housing markets collapsed, CRE collapsed.
    - the local governments got stuck with a much to big of a portfolio of land. This land was still in the books at pre-2008 prices...
    And the expected profits were also already booked in!
    - Only now local, governments start to get to grips with reality... they have started to write of some of the value of that portfolio and to sell of land at a lower price... accepting the loss...
    - The citizens will end up paying for this loss! Through OZB tax. Remember that when you vote in march 2014!
    - mean while houses are not getting built, industrial estates stay empty, building trade lays of workers, local government workers are layed of, kadaster has much less work to do and makes less revenue.
    - so less money is coming in, this means local governments must do drastic spending cuts.
    - mean while national government pushes certain task towards the local governments without the necessary funding!

    i still think many managers, wethouders and local politician are still not completely in grips with reality...

    Next elections for local government will be in march 2014. Expect many local politicians to kick the can past those elections, then reality will strike hard!
    We have some interesting times ahead!

  3. Thank you, guys for your valuable comments. I have one remark upon the anonymous comments.

    In an earlier blog, I could show by using statistical data that the Dutch housing crisis already started before the credit crisis took off. Please have a look at the charts, based on CBS data: