A finews.asia series takes us to some of the favorite places fund managers choose to spend their summers. First stop: The Hague.
By Stijn Stortelder, Portfolio Manager Alternative Fixed Income at Aegon Asset Management
Most people are familiar with The Hague as the seat of the International Court of Justice. International cases have been heard here since it was established in 1945. Its importance increased in 2003 when it also became responsible for prosecuting particularly serious crimes such as genocide, crimes against humanity, war crimes and crimes of aggression, making The Hague an international meeting place of global significance. The Dutch parliament and the royal family are also based here.
But what makes The Hague so special, especially in summer, is its excellent location by the sea. The beach is not far from the city center. The stretch of beach in the Scheveningen district, once a fashionable spa resort, is particularly popular with tourists. As early as the 19th century, the prestigious Kurhaus attracted the aristocracy and moneyed nobility from The Hague, who were transported there by carriage along magnificent avenues to indulge in the pleasures of bathing.
Holland's Largest Village
Stijn Stortelder, Aegon Asset Management (Image: courtesy)
Today, you can take the tramway directly from the beach to the central station of the royal seat. From here, depending on your mood and the weather, you can set off for a walk in the Hague Forest, which is home to a lake and the Royal Palace. Or you can plunge into the hustle and bustle of the Lange Voorhout to buy treasures from times long past at the antiques market. You might even bump into the royal couple shopping there, as the distances are short in «Holland's largest village» – The Hague was never granted city rights. Nowhere else in the Netherlands can you find as many sights per square meter as in The Hague.
The major cities of Amsterdam, Rotterdam and Utrecht can be easily reached from the station in less than an hour. This metropolitan region, known as the «Randstad», accounts for only around 15 percent of the Netherlands' surface area, but is home to 40 percent of the population: large companies, universities and infrastructure make the Randstad a world-class European economic and cultural center.
Three Years Without Any Loss
Randstad residents have above-average incomes. With a homeownership rate of 70.6 percent, the Netherlands is also well ahead of Switzerland (42.3 percent), which is one reason why Dutch residential mortgages are worthwhile for investors. The Aegon AM Dutch Mortgage Fund is one of the largest funds of its kind on the market. As a classic long-term investment, it is a popular product for institutional investors. Dutch pension funds in particular, but also Swiss pension funds and insurance companies, are showing great interest in pooled Dutch residential mortgages.
Turfmarkt in The Hague (Image: Unsplash)
In addition to a yield similar to that of European government bonds of well over four percent, the low risks are also convincing. The entire Dutch residential mortgage market has an exceptionally low constant default rate (CDR) of four to five basis points. Aegon's Dutch Mortgage Fund has not recorded a single euro of loss in the last three years. As a dividend payer, the fund also provides the investor with a regular income.
Real Estate in Recovery
With an average loan-to-value (LTV) ratio of 56,3 percent (on aggregated basis of two funds), Dutch residential mortgages have a relatively high equity ratio, which also speaks in favor of this asset class. Stable mortgage rates and rising incomes are ensuring consistently high demand for Dutch owner-occupied properties, particularly from older people looking to move into smaller homes.
The Dutch real estate market is currently in a phase of market recovery, driven by robust economic conditions and sustained high demand for housing. This is also reflected in a high demand for mortgages. Demand is again particularly high in the Randstad region: the area around The Hague continues to enjoy unbroken popularity.
