Good year, exciting outlook for European Securitisation market

Despite a slowdown in the Dutch buy-to-let housing market, a healthy macroeconomic outlook and upbeat regulatory sentiment all point to a positive period ahead for the European securitisation market, says Yuval Toledano, Assistant Vice President for EMEA Structured Finance at Moody’s Investors Service.

How does the securitisation market in the Netherlands and Europe look from your point of view?

Last year was very good for securitisation. In terms of issuance, it was a very good year in Europe, although in the Netherlands there was no notable increase in issuance volumes, compared to previous years. However, in terms of the collateral performance of securitisations it was an excellent year in the Netherlands, with arrears levels among the lowest in Europe.

What triggered this uptick?

We saw a recovery in general macroeconomic conditions in the Netherlands and Europe-wide. Although the current geopolitical developments, and the trend towards trade protectionism, do create some uncertainties, we nevertheless see a benign macroeconomic environment which supports strong collateral performance.

Were there specific developments last year which indicate changes in the securitisation marketplace?

We rated the now famous solar panel securitisation on behalf of Enpal in Berlin: Europe’s first residential solar securitisation program which raised € 240 million. We were pleased to see that deal take place. It is interesting to consider solar energy as a new asset class, although future issuance of similar deals is dependent on loan volumes which can be realized in the market. These deals do help finance the green transition, which is an important focus of European regulators, so that is certainly a very positive innovation.

Did the Dutch market have any surprises?

The buy-to-let market has been suffering from steadily increasing regulatory pressure from the Dutch authorities. This culminated in 2024 with the affordable rent act (wet betaalbare huur), which increased the scope of regulated rental properties in the Netherlands. Around half the rental properties which were not previously regulated were recharacterized and suddenly subject to rental caps. We therefore expect to see fewer buy-to-let issuances. Investing in rental properties is simply becoming less economically viable for real estate investors.

There have already been numerous press reports of landlords selling off their portfolios of rental properties. We might also see an increase in prepayments on existing transactions which would increase loan pool concentration. This could lead to more volatility in terms of arrears and general performance. However, due to the house price growth and the fact that these loans tend to have lower LTV levels than owner occupied loans it’s not likely we will see significant losses in these transactions. It’s really a culmination of a period of increased tightening of regulations on the Dutch rental market.

How is the Dutch buy-to-let market likely to develop?

That is difficult to say. There is always tension between a political desire to curb the growth of the rental market because it was driving house prices up, and the Dutch central bank which says an active rental housing market is healthy for the general housing market. We will be watching developments closely.

What do you forecast in terms of European house price developments?

Across Europe as a whole, house prices broadly fell in 2023. However, they then began picking up in France, Germany, and the Netherlands. For 2025 we’re expecting particularly high house price growth in the Netherlands of 6.6% in 2024 and 4% in 2025, driven by robust wage growth and a change in underwriting criteria. There also remains a persistent housing shortage in the Netherlands, despite an increase in new housing construction.

Which other market developments have caught your attention?

There appears to be a paradigm shift about to take place concerning European Securitisation. European policymakers have begun proposing various strategies to grow the securitisation market, in the context of the proposed Capital Markets Union (CMU) coupled with the extensive funding requirements associated with the green and digital transformations of the economy. This appears to signal a major change in the regulatory perception of securitisation in Europe.

How do you view the CMU reform proposals, coupled with the European Supervisory Authorities’ proposed revisions of due diligence regulations on securitisations?

We expect these to help strengthen the confidence of strategic investors in issuance, and also attract new market participants which will have a positive impact on market liquidity and lower funding costs. This may in turn lead to more transaction transparency thanks to a broader pool of investors. So, a positive development.

Do you expect regulatory changes to accelerate?

We don’t expect any regulatory changes to materialize this year. However, the fact that they are being discussed and that the regulatory stance appears to be turning positive can already give a boost to the securitisation market. Having said that, macroeconomic circumstances are still likely to be the key market drivers in the near future.

What is the market saying about this new wave of optimism on securitisation?

To be honest, I am very much looking forward to the Securitisation Event in Amsterdam, to see the presentations and hear what market participants such as investors, issuers and regulators have to say about this new-found positive sentiment.