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Nordic Update

A scorching housing market

Publicerad: 12 oktober 2018, 17:02

Housing accounts for almost half of all transactions that took place in the Swedish real estate market in the first half of 2018 and there is more in the pipeline as foreign investors turn to Swedish housing. Hotels and community properties are also progressing well.

Housing accounts for almost half of all transactions that took place in the Swedish real estate market in the first half of 2018 and there is more in the pipeline as foreign investors turn to Swedish housing. Hotels and community properties are also progressing well.

When the country’s real estate advisor sums up the volumes on the Swedish transaction market for the first half of 2017, the figure amounts to somewhere in the range of SEK 70–72 billion. A figure that is slightly lower than for the corresponding period last year, but which is still considered very strong taking into account the huge volumes we have seen in recent years. Given that the market does not collapse completely, which is considered highly unlikely, there is absolutely no doubt that we will have another year of SEK 100 billion in volumes and that these volumes are approaching SEK 150 billion is reasonable.

According to Pangea Property Partners, the aggregated transaction volume in the first half of the year amounted to SEK 71.5 billion, compared with SEK 82.9 billion last year, when the full-year volume was SEK 150.9 billion. It is worth noting that one of the half-year’s largest transactions, the framework agreement between Heimstaden and Magnolia Bostad on the acquisition of housing for a total of SEK 9.6 billion, is not included in the figures. It will be included gradually as housing is completed and delivered to the buyer.

Much of the real estate market reporting so far this year has included housing and the reasons are twofold. Firstly, the housing market turmoil has resulted in a focus on the troubled housing developers, and secondly, housing has been in vogue as an asset class. It feels like each and every item of transaction news involves housing, and breaking down transaction statistics by different segments, as Pangea has done at the request of Fastighetsnytt, it turns out that the feeling reflects the current situation quite well.

Sharp percentage increase
Of the SEK 71.5 billion, 32.2 billion represent housing, that is 45 per cent. This is a sharp increase from last year, particularly in terms of the relative figure, as housing accounted for 35.5 per cent of the transaction volume of the first half of the year. Even in terms of the absolute figure, that is, the amount invested in housing, which last year was SEK 29.4 billion in the first half of the year, the increase is significant, if not equal. With 45 per cent of the total market, one can of course say that the housing market is scorching, and several consultants whom Fastighetsnytt has talked to indicate that there are a number of housing transactions in the pipeline that reasonably should be completed in the second half of the year.

Mikael Söderlundh, Head of analysis at Pangea, tells Fastighetsnytt that a price correction took place in some segments.

– It has been most evident for building rights and major projects, but we expect continued high transaction volume in the housing sector in the future, partly driven by more structural transactions.

Mikael Söderlundh. Foto: Pangea.

Also last year, housing was the hottest asset class, but the temperature has obviously risen, and other segments that are growing in relation to the rest of the market are community properties and hotels. In the first half of the year, community properties worth SEK 7.1 billion changed hands, and although the segment weakens slightly in absolute terms (from SEK 7.2 billion last year), it increases in percentage terms by 1.2 percentage points to 9.9 per cent. Moreover, the share of offices and trade is decreasing.

Like the housing market, the hotel market is scorching, and has increased by almost SEK 1.3 billion to SEK 3.2 billion, from 2.3 per cent to 4.4 per cent.

Starwood and Vonovia
A new trend in the housing market is the entry of foreign players. Starwood Capital has made a couple of multi-billion deals, partly when entering into a joint venture with Oscar Properties on the development of the Primus neighbourhood on Kungsholmen in Stockholm, but, in particular, when buying into Victoria Park for a number of billion. Starwood did not get as much of Victoria Park as they had hoped since German Vonovia made a competing offer and got the lion’s share. Moreover, the Victoria Park deal is the biggest deal of the year so far, and in fact a purely residential deal where foreign players have gained control of a stock worth SEK 17 billion.

– There is still a very strong demand for housing among major investors, despite the weaker sales in the private market. We see no signs of a slowdown, on the contrary, the price fall seems to have attracted a wave of new foreign investors, says Mikael Söderlundh.

If you choose to categorise Heimstaden and D. Carnegie & Co as foreign players because of the large foreign ownership, the list of the largest housing buyers is dominated by foreign players, but also players such as Amasten and John Mattsson appear on the list.

Sverrir Thór

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