The Scandinavian real estate market is showing absolute peaks. The market is also attracting the interest of a growing number of international investors, who are scrambling to gain a foothold in the region before it’s too late. This was stated in a report by Scandinavian real estate consultant Newsec.
Real estate deals worth $ 60 billion are expected to be recorded in Scandinavia this year. This is roughly the same sector turnover rate as in the United Kingdom, which, however, has twice the population of the Scandinavian countries. Compared to a year ago, Scandinavian real estate transactions will show a 10 percent increase, according to Newzic.
“Interest in the Scandinavian real estate market has reached its peak,” commented Max Barclay, CEO of Newsec. Scandinavia may be a small region, but it can count on great wealth. Moreover, the region is characterized by a stable politics and highly educated population.
These are all very attractive criteria for investors. After all, these items provide access to long-term stable cash flows. These aspects of raising capital should not be underestimated.
In Sweden, the largest economy in Scandinavia, real estate deals worth 46 billion crowns ($ 5.3 billion) were struck during the first three months of this year. “With this, the Swedish real estate sector recorded the strongest first quarter in its history,” says Barclay. Swedish property prices continue to set records. Single-family home prices are showing growth rates of 17 percent annually.
Magdalena Anderson, Sweden’s finance minister, warns that these developments require measures to be taken to ensure a reasonable balance between supply and demand. It also indicates the impact of the Corona pandemic on consumer spending patterns.
“In the past year, people have invested more money in their homes than they have invested in goods and services,” Anderson says. But steps are now needed to ensure the housing market does not overheat. In addition, measures are mainly taken – such as supporting investment to build new homes – to increase the housing supply.
“Similar developments can be seen in the commercial real estate market,” Bloomberg News said. This became evident, for example, in the bidding war in which the Norwegian company Entra, which specializes in office real estate, was involved.
Ultimately, Intra said it would prefer to remain independent, given the market growth opportunities. So Swedish property managers such as Castellum, SBB and Fastighets AB Balder are looking for other investment opportunities.
Barclay notes that a number of real estate companies in the region can still be traded relatively inexpensively, making them attractive targets for acquisitions. However, he warns that supply will continue to decline as large institutional investors show increased interest in real estate.
Barclay refers to the Norwegian capital, Oslo, where 67 percent of office buildings are already in the hands of long-term investors. Newsec estimates that institutional investors will own about 20 percent of the market by the end of this decade. At present, their share is around 12 percent.
“This won’t change market activity in the very short term,” Barclay admits. “But the effect can be experienced over a period of four to five years.”