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Tuesday, 26 August 2014

‘Why it could be a good time to strike a deal for a new house in The Netherlands’: Ernst in informal discussion with Wienke Bodewes, CEO of project developer and asset management company Amvest

During the last one-and-a-half year, I had the pleasure of being present a number of times at the BNR Newsroom semi-live talk radio shows, presented by the distinguished and excellent host Paul van Liempt.

One of the very interesting people, who I met in the aftermath of these shows, was Wienke Bodewes: CEO of project developer and asset management company Amvest and, besides that, chairman of the Dutch association of project developers NEPROM.

Wienke Bodewes, CEO of Amvest and chairman of NEPROM
Picture copyright of Ernst Labruyère
Click to enlarge
Last year, I was invited by Wienke for his presentation of CSMART, the hi-tech training and simulation centre for helmsmen and operators of cruise ships, established by Carnival Cruises. CSMART will be developed in my hometown Almere, as part of ‘Project Duin’ in which Amvest is the leading project development company and main contractor.

The CSMART simulation centre became a high-profile ‘flagship’ project, enabling a flying start for Project Duin; this project encorporates the development of residential real estate in a rural surrounding of artificial dunes, completed with venues for sport, recreation and hospitality.

As an ICT Testing Consultant – my normal day job – I had been between assignments from early May to mid July of this year. This ‘time off’ gave me the time to meet interesting people from my network, in an informal setting.

I was therefore very pleased that Wienke Bodewes could offer me some of his valuable time. For last Wednesday, August 20th, we made an appointment to drink a cup of coffee together and chat about the developments on the Dutch and international real estate markets and in the Dutch economy in general.

Amvest, of which Wienke is the CEO, is a project developer which develops new residential and commercial real estate in The Netherlands. Besides this, the company is the asset management company for two large Dutch insurance companies; it maintains the extensive residential real estate portfolio held by these companies and also offers them new real estate projects, developed by Amvest, on a ‘right to pick first’ basis, but without a purchase obligation.

Amvest is currently also busy with slightly expanding its customer base (through investments and participations in new real estate projects and portfolios), but this customer-base, however, will solely consist of very large, corporate and institutional investors and no private investors at all.

One of Wienke’s concerns is the current, very strict regulation with respect to investments and participations, which is enforced upon Amvest by the Dutch Authority Financial Markets (AFM) and the Dutch National Bank (DNB). 

“These are not inexperienced private investors, but corporate and institutional investors that are used to investing millions of euro’s in projects. The whole AFM and DNB ‘paperwork’ (development prospectuses and other mandatory documentation) for a new investment portfolio takes a lot of time, legal research and investment money. 

While I very well understand the necessity for this paperwork regarding non-professional and smaller investors, it would be great when the regulation would be simplified in our particular case. As I stated: these are all matured investment professionals with whom we are dealing and no rookies”.

Coincidentally, Wienke and I had both been in London and Paris recently and we agreed that the dynamics and vibrant energy of London made this one of the hottest places to be, due to its attractive mixture of historical buildings, new skyscrapers, top notch residential real estate and interesting shopping, entertainment and hospitality zones. 

Wienke spoke about the one of the latest London projects, concerning Battersea Power Station – a genuine landmark of a 20th Century industrial building, becoming world-famous through the Pink Floyd album ‘Animals’ – which will now be turned into a residential real estate project for utterly luxurious appartments and condos.

London is a place where development of residential and commercial real estate has reached ‘the next level’ recently and where – off centre – houses and condo’s are sold at truly unbelievable prices of (sometimes) more than €15,000 - €20,000 per square meter.

These price developments must be partially ‘bubblicious’ of course, but, according to Wienke, they also reflect the fact that London attracts the rich and famous from all over the world: not only Russian and Chinese millionaires, but also people from many other countries, who have historical strings attached with this vibrant city and now want to have a ‘pied-a-tèrre’ in London.

In comparison with not only London, but also booming German cities like Munich, Frankfurt and Berlin, the Dutch capital Amsterdam is still relatively cheap. Where prices for houses, appartments and condos in the aforementioned German cities – and of course London – often easily exceed €4000 per square meter, it is quite hard to find a house or appartment in Amsterdam that will cost you more than €3000 per square meter.

This brought us to the Dutch residential real estate (RRE) market, which is definitely on its way back, according to Bodewes. The soaring sales numbers and slowly, but steadily rising prices, for a number of months in a row, undoubtedly point in this direction.

I objected that the reduction of the ceiling amount for the Dutch National Mortgage Guarantee in July 2014 – to €265,000 from €290,000 -  could have pushed the decision to buy a house forward in some cases, for interested people. This could lead to a diminished demand for residential housing in August and beyond, in my humble opinion.

Nevertheless, Wienke was convinced that the Dutch RRE market had gone through the trough and was now climbing up again. This effect would be noticed earlier within the portfolio of existing houses than at the newly-built houses, as the latter are always trailing, due to the time that it takes to develop new projects. Nevertheless,the worst is definitely behind us.

Bodewes: “It figures: in average the Dutch housing prices have dropped by no less than 20% - 30% during the crisis years and the interest is almost at an all-time low. 

Although the maximum obtainable mortgage amount has definitely decreased under pressure of the Dutch banks and the new regulation of the AFM, the current reduced sales prices and historically low interest rates offer you so much ‘bang for your buck’ that it is worth your while to not wait any longer, with buying your dream house. 

Besides that, it almost costs you money to save it at the bank, with the current minimal interest rates on savings' accounts. Especially when you have saved money during the crisis years, which you now use for partially buying your new house, you can get a very good deal at this moment.

Of course, when you compare the Dutch housing prices with the prices of houses in f.i. the German rural areas near the Dutch border, then Dutch houses still seem relatively expensive. This changes, however, when you compare Dutch housing prices with the prices in the larger German cities and industrial areas. The ‘Randstad’ [the large peripheral "city", consisting of Amsterdam, Rotterdam, The Hague and Utrecht and the urban areas in between - EL] can very well be compared with such large German cities. If you do so, then you will see that the Dutch houses are not overpriced at all”.

However, Wienke Bodewes was convinced that the resurrection of the Dutch housing market would not be evenly spread over the country.

“For instance Amsterdam, Utrecht and the provinces of North Holland and Utrecht are doing great currently. Still, in the peripheral areas, like the provinces Drenthe, Groningen and Limburg, things don’t look so bright yet. Sales and price development of residential houses will increase most in the frontrunning areas, and the other areas will trail for some time or will remain at a structurally lower level”.

Bodewes was also not unconditionally optimistic about the commercial real estate market in The Netherlands. “Amsterdam – especially the Zuidas (i.e. South Axis) is doing fine and also the rest of Amsterdam is improving. Other A-locations are also doing better. However, there is still a lot of problematic commercial real estate and shopping space”.

We agreed that this vast amount of problematic and often uninteresting commercial real estate was caused by commercial building activities that continued too long after the start of the crisis in 2007/2008 and that took place without a clear, specific demand from future buyers and/or asset managers. 

Companies and especially communities built for 'stock', speculating on an 'ever stable demand' for new real estate. It will take quite some time to get rid of this excess CRE. There is simply too much shopping space and too much office space and it will take years and years to reduce this portfolio.

Of course, Wienke is not pleased by the developments in Russia and the Ukraine and also the Middle-East. A few months ago, there seemed to emerge a new dynamics and increasing consumer confidence in The Netherlands, but this confidence received a fierce blow from the MH-17 plane incident, caused by the simmering conflict in East-Ukraine.

Still, his company Amvest did relatively well during the crisis: “Amvest always did business in a fair and square, down-to-earth manner, without taking too much risk. Besides that, we had nothing to hide in our way of doing business. 

Therefore it was not hard for us to stay afloat and that is why we did not experience most of the problems that some other project developers and large building companies did experience.

A few large building and construction companies have done risky projects in very challenging and opaque markets. These are now going through a rough time. You must reckon that the international tolerance for uncontrolable project plans, moonlighting and payment of f.i. slush money to principals of projects has evaporated. 

Countries – especially the USA, but also The Netherlands – are much tougher on bribery and moonlighting now than they have been in the past. What have been ‘best practices’ for years, has now become untolerable for many national governments”. 

I thank Wienke Bodewes for the opportunity to openly talk with him.

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