Tuesday 22 August 2017

Nordic property investors cash in after price surge

The Swedish property market is booming amid a housing shortage and rising prices
The Swedish property market is booming amid a housing shortage and rising prices

Niklas Magnusson

Property owners are likely to start cashing in to a greater extent this year after an eight-year rally in prices across the Nordic real estate markets, according to Pangea Property Partners.

Potential sellers include funds, companies that want to streamline their portfolios and private investors who see good exit opportunities, Pangea said in its Real Estate Outlook 2017 report.

There's also increasing focus on selling for municipalities, owner-occupiers and developers while several international investors "will probably also realise their profits in the Nordic markets in 2017", Pangea said.

"The strong investor demand for Nordic real estate in recent years is now combined with more sellers putting their assets for sale," Mikael Soderlundh, a partner at Pangea and the company's head of research, said in the report.

The shift would follow record deal-making in the Nordic real estate market in the past few years, with volumes rising 7pc to €43.4bn ($46.7bn) last year from a previous record in 2015.

While geopolitical uncertainty and the UK's vote to leave the European Union have hurt property transaction volumes in Europe and Britain, markets such as Sweden are booming amid a housing shortage and rising prices.

Pangea forecasts "very strong" transaction volumes of 150 billion kronor (€1.58bn) to 180 billion kronor in Sweden this year, though lower than last year's 209 billion kronor.

Finland is set for another record year, with volumes of €6bn to €8bn compared with €7.2bn last year.

Pangea sees "moderate" volumes in Denmark of 45 billion kroner (€6bn) to 60 billion kroner this year, compared with 48 billion kroner last year.

In Norway, where the crisis in its oil and offshore industry has hurt the economy and the real estate markets, Pangea expects 50 billion kroner (€5.6bn) to 60 billion kroner of transaction volumes in the "bread-and-butter" market, plus 10 billion kroner to 20 billion kroner of "mega deals".

That compares with total transaction volumes of 71 billion kroner last year.

"The Nordic property markets will continue to perform well," Pangea said.

"In particular, segments with strong rental growth such as central offices in Stockholm and Oslo, as well as quality hotels, are pinpointed as winners, while yields will tilt upwards for secondary assets," the company added.

Pangea Property Partners monitors transactions for properties exceeding €5m in everything from residential real estate to office space and hotels.

Overall growth in the Nordic region was last year driven by residential properties, which accounted for 29pc of all transactions.

(Bloomberg)

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