4 minute read
The Swedish Property Market
ASTOUNDING VOLUMES SO FAR THIS YEAR – 2021 WILL SHATTER ALL PREVIOUS RECORDS
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Though there have been some minor setbacks, 2021 has generally constituted a strong year of recovery for the Swedish economy. Economic growth throughout 2021 has been substantial, and is projected to end up at approximately 4.5 per cent for the year as a whole – one of the strongest growth rates among the economies that performed well in 2020. Unemployment has fallen and is approaching 7 per cent – high in a European context, but low when factoring in the very high employment rate that Sweden also boasts. After an initially sluggish vaccination process, vaccination rates picked up and Sweden now, together with the other Nordic countries, boasts one of the world's highest vaccination rates. Inflation continues to not quite reach the Swedish Riksbank’s goal of 2.0 per cent, but the Riksbank is expected to leave the key interest rate at 0 per cent for the foreseeable future despite this. All in all, the Swedish economy has fared well throughout the covid-19 crisis, and the country has generally been substantially less impacted than many major European economies as a result.
While Swedish economic performance has been strong, the Swedish real estate market has performed astoundingly well throughout 2021. As of the end of September, the full-year transaction volume record of SEK 218 billion – set in 2019 – has already been broken. The transaction volume in 2021 is expected to exceed SEK 300 billion – an astonishingly strong performance, which is set to make Sweden the third largest real estate market in Europe, behind Germany and the United Kingdom but ahead of France. On the per capita level, the Swedish real estate market is by far the strongest in Europe, and on a global level is only outperformed by city states like Singapore and Hong Kong. Record volumes have been noted throughout every quarter thus far this year, driven both by large M&A transactions, as well as strong demand for virtually all property segments.
Contact: Adam Tyrcha, PhD adam.tyrcha@newsec.se
Interesting trends on the Swedish property market in 2021
ASTONISHING VOLUMES ON THE MARKET
Record transaction volumes have been noted in both Q1 and Q2 thus far this year, and at the time of writing, Q3 looks set to also be a very strong quarter. Both Q1, at SEK 46 billion, and Q2, at SEK 103 billion, constituted the strongest Q1 and Q2’s of all time. It is noteworthy that even without some of the large M&A transactions, the performance of the market would have been record-breaking.
M&A DEALS REACH RECORD HIGHS
Though performance has been strong without M&A transactions, the number and volumes traded in M&A transactions have also been astoundingly strong. Thus far this year, M&A transactions have accounted for about 35% of the total transaction volume – the strongest percentage ever recorded. Large deals have included Corem’s acquisition of Klövern, Samhällsbyggnadsbolaget’s investments into Unobo (Riksbyggen) and Offentliga Hus – with more to come in the autumn and winter.
OFFICES RECOVER
The office segment has recovered substantially from the trough it experienced in 2020, accounting for 24% of the total transaction volume thus far this year. A large portion of this volume is made up of M&A transactions – however, the total volume traded in office transactions, even disregarding M&A deals, is substantially stronger than in 2020. Residential continues to be the strongest segment, at 26% of the total transaction volume, but the office segment is hot on its heels, looking to retake its throne.
SEK 188 BILLION
Total investment volume in 2020
OVER SEK 300 BILLION
Total investment volume expected in 2021
+4.5%
GDP growth expected in 2021
ALTERNATIVE SEGMENTS PROSPER
Segments that used to be termed alternative, such as industrial (including logistics and warehouse) and public properties have performed very well thus far in 2021. The industrial segment has accounted for 18% of the total transaction volume, putting it in a comfortable third place. Public properties, meanwhile, sit at 15% of the total transaction volume, setting the segment up for its second strongest year of all time.
INTERNATIONAL INVESTMENT IS WEAKER THAN USUAL
Thus far this year, international investment has accounted for 15% of the total transaction volume – one of the weakest years for foreign investors in recent years. However, this is by and large a result of the very strong transaction volume as a whole – in terms of volume, the amount invested by foreigners is actually higher than the historical average. 62% of international investment into the Swedish market thus far this year has been nonNordic, which is also a little higher than the historical average, and is a testament to strong global interest in the Nordic markets.
GOTHENBURG ATTRACTS STRONG INTEREST
In recent years, Gothenburg has fallen off a little, accounting for an average of 7% of the total transaction volume in any given year. However, thus far in 2021, Gothenburg has accounted for 12% of the total transaction volume – putting the city comfortably ahead of Malmö. The strong volume has been particularly driven by a number of large office transactions, which have eluded the city in previous years. This could signal an impending shift in the coming years, where Sweden’s second city in terms of population once again becomes its second city in terms of the transaction market.
