The Swedish Property Market

2021 SHATTERED ALL RECORDS – CAN 2022 KEEP UP THE MOMENTUM?

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2021 proved to be yet another interesting year for the Swedish economy. The year was mostly marked by recovery, though some resurgence of the covid-19 virus, in both the delta and omicron variants, resulted in periodic sharpening of restrictions, impacting recovery to some degree. Economic growth, however, remained strong throughout the year, and ended up at 4.7 per cent for the year as a whole – one of the strongest growth rates among the economies that performed well in 2020. Unemployment fell to 7.5 per cent in 2021 – high in a European context, but low when factoring in the very high employment rate that Sweden also boasts. Inflation picked up towards the end of the year, and ended up at slightly above 2% in 2021 – relatively low in a global context. The Swedish Riksbank is expected to leave the key interest rate at 0 per cent for the foreseeable future. The Riksbank has stated that the rate is set to remain unchanged until 2024, though an increase in 2023 would not be entirely surprising according to some industry forecasters. All in all, the Swedish economy continues to perform very well, and the country has navigated the covid-19 crisis well, economically speaking.

Few things are stronger than the Swedish economy, but one is the Swedish real estate market – which has performed incredibly well in 2021 and thus far in 2022. The full-year transaction volume in 2021 ended up at an enormous SEK 400 billion – almost double the previous transaction volume record, which was SEK 218 billion, set in 2019. This means that Sweden was the third strongest transaction market in Europe in 2021 – stronger than France, and not too far behind Germany and the United Kingdom. Though 2022 will have a tough time matching up to the record volumes seen in 2021, the year has come off to a strong start and is expected to post a very strong transaction volume, too – likely among the strongest of all time.

Contact: Adam Tyrcha, PhD adam.tyrcha@newsec.se

»The full-year transaction volume in 2021 ended up at an enormous SEK 400 billion – almost double the previous transaction volume record«

Interesting trends on the Swedish property market in 2021 and 2022

RECORD-SHATTERING VOLUMES ON THE MARKET

Every quarter in 2021 saw the strongest transaction volume of all time for that respective quarter – meaning that Q1 was the strongest Q1 of all time (SEK 52.1 billion), Q2 was the strongest Q2 of all time (SEK 108.2 billion), Q3 was the strongest Q3 of all time (SEK 85.7 billion), and Q4 was the strongest Q4 of all time (SEK 153.5 billion). The Q4 volume alone was stronger than the full-year transaction volume in 2018. The November transaction volume – SEK 76.3 billion – was the strongest transaction volume in any single month of all-time, and was not far off the full-year transaction volume seen in 2013. The strong volumes seen thus far in January and February 2022 indicate that the record volume for a Q1 of SEK 49.1 billion may be eclipsed in 2022.

M&A DEALS DROVE VOLUME – BUT A RECORD NUMBER OF TRANSACTIONS, TOO

The record transaction volume was driven by a large number of different types of transactions. M&A deals ended up accounting for 39 per cent of the total transaction volume – the highest ever share taken by these. 25 M&A deals occurred throughout the year, with large deals including Corem’s acquisition of Klövern, Castellum’s acquisition of Kungsleden and Samhällsbyggnadsbolaget’s acquisition of Amasten. The year also saw a record number of property transactions as a whole, however, with 799 completed deals – of which 63 were above SEK 1 billion.

SEK 400 BILLION

Total investment volume in 2021

SEK 350 BILLION

Total investment volume expected in 2022

+3.75%

GDP growth expected in 2022

STOCKHOLM STRIKES BACK

The Swedish capital city accounted for 47% of total transaction volume in 2021. This was the strongest share taken by Stockholm since 2009 – the city normally accounts for closer to 40% of the total transaction volume. Strong activity in Stockholm was primarily driven by some of the above-mentioned M&A transactions, as well as the sale of the Akelius portfolio to Heimstaden, and Heimstaden’s subsequent resale of the portfolio to a Heimstaden joint venture with Allianz.

ALL-TIME HIGH ACROSS MANY SEGMENTS

The residential segment accounted for 35% of the total transaction volume in 2021 – the highest share ever taken by the segment. Volume within the residential segment amounted to as much as SEK 138 billion – double the previous record volume. The second strongest segment was the office segment, at 22% of the total transaction volume, achieving a record transaction volume of SEK 83 billion. The office volume was driven by M&A transactions, as well as a few strong single property and portfolio deals. An astonishing 14 segments and sub-segments achieved record-high volumes in 2021, and it is much easier to list the segments and sub-segments that did not do so (these include hotels, retail, and the shopping centre subsegment), than those that did.

FOREIGN INVESTORS FALL BACK SOMEWHAT – BUT ARE LOVING LOGISTICS

Foreign investors accounted for just 17% of the total transaction volume in 2021 – the lowest share taken by foreign investors since 2013. In the past few years, the average share taken by foreign investors has been between 25 and 30%. Nevertheless, in terms of the actual volume purchased by foreign investors, this amounted to SEK 65.0 billion – the strongest such volume since 2007. A lower share of the total transaction volume being taken by foreign investors is largely a result of the lack of foreign involvement in most major M&A deals throughout the year. Foreign investors have shown a particular interest in industrial properties – accounting for over 40% of the volume within the industrial segment, and close to 70% of the volume within the logistics sub-segment.