International Investment in Nordic Property
The European economy is still growing slowly following the global recession. At the same time, fears over the consequences of Brexit and changing policies in many European nations have forced international investors to look to new markets. Increasingly, these investors have turned toward Denmark, Finland, Norway and Sweden.
Let’s take a look at five reasons why the Nordic countries have become so enticing:
- Commercial market heating up: Between June 2015 and June 2016, commercial investment volume increased 28%, reaching $34.7 billion as investors took advantage of exchange rates. Meanwhile, in 2015, retail investments grew to $10.1 billion, nearly twice the 2014 rate. Norway saw the largest increase, but property investment in Sweden also was strong. At the same time, however, investment in office space declined 51% in 2015. Investment in office space was strongest in large urban centers such as Helsinki. The major investors were from other parts of the Nordic and Germany. Retail investment took place mainly in Copenhagen and Oslo. For all four Nordic countries, foreign investment in retail and office properties ranged from 42.6% to 58.3%.
- Sweden on the edge: This month, Barclays credit analysts said they believe instability in European Union countries would continue throughout the new year. At the same time, the European Systemic Risk Board gave Sweden a ranking of 2.2, the highest danger level. Still, where there is risk, there is reward. “but as long as interest rates remain low, a major downturn is unlikely, in our view,” Barclays said. Meanwhile, Swedish property values are increasing. Single family home prices increased 9% in 2016 while apartment prices climbed 7%.
Source: Business Insider Nordic and Reuters
- Partnerships are available: Foreign investors have the opportunity to partner with domestic property companies. That’s exactly what happened in July when German investors Bayerische Versorgungskammer partnered with Norse asset management company CapMan. CapMan will invest $426 million in Scandinavia on behalf of the Germans. In April, CapMan advised Bayerische Versorgungskammer on an $80 million investment in Finnish residential property.
Source: Globe Newswire
- The opportunity to make big deals exists: In July 2015, the largest real estate deal in Scandinavia in seven years closed. Blackstone Group LP, the world’s biggest manager of alternative assets, purchased $2.7 billion in real estate portfolios. The group owns commercial and residential property throughout the Nordic as well as Germany, Latvia and the U.S. Blackstone has plans to make future real estate investments. Investors had a keen interest in Norway as the value of the krone decreased 6.7% against the euro and 31% against the U.S. dollar between July 2014 and July 2015.
- Fearing Brexit, investors move north to Sweden: Fearing what will happen in the UK following the Brexit vote, investors are looking elsewhere and Sweden, the largest economy in Scandinavia, is the top choice. There, property shares increased 35% in a year and some companies have seen as much as a 60% increase. Investors are attracted by low interest rates and stable economics.