The share of foreign investors in the Nordic property market is expected to remain record high in 2018. All countries are performing well, the local currencies are cheap and the price drop in the Stockholm housing market creates new opportunities, according to the new report Pangea Property Outlook 2018.
The Nordic transaction volume reached just above €42 billion in 2017. It is the second highest level ever recorded and the Nordic region represented about 15 percent of the entire European property market. The share of foreign buyers was also high, 43 percent, and it is both commercial and residential properties attracting interest.
“International investors have traditionally focused on the commercial property sector, but now we see a strong interest for multi-family housing and residential development as well. In Sweden, this is driven by the recent price drop in Stockholm,” says Joakim Arvius, Partner at Pangea Property Partners.
According to the report, all Nordic countries are performing well with competitive growth rates in a European comparison. In addition, the local currencies, and in particular the Norwegian krona, have depreciated significantly over the past few years.
In 2018, the office sector is expected to perform well with continued rental growth in all Nordic capitals.
”The rental growth is concentrated to the main cities, but we expect prime rents in central Stockholm to deaccelerate after a strong run over several years,” says Mikael Söderlundh, Head of Research and Partner at Pangea Property Partners.
Logistics is another segment with positive outlook, driven by strong demand from occupiers and investors, while there are more challenges in other sectors such as secondary retail and residential development. In general, property yields are bottoming out and rental growth is needed to drive capital values further.
The Nordic transaction volumes are expected to decrease slightly in 2018, from historically high levels. However, it is possible that we will see more large corporate transactions, driven by a reprising and consolidation in some segments. For example, there are more listed property-related companies on the Nordic stock market than ever before, and the former valuation premiums are gone.
“The listed property sector in Sweden is currently valued just below par, and there is a significant discount in the rest of the Nordics. In other words, the climate has changed from focusing on IPOs of new companies to takeovers and mergers,” says Bård Bjølgerud, CEO and Partner at Pangea Property Partners.
