Sure, winter is coming - but to warm the hearts of investors, we have once again taken a close look at the Nordic real estate markets. Because the real estate markets there currently embody what is in demand: stability, transparency and yield chances. The fact that the analysis is rather easy for us is thanks to our broad and deep market coverage as a company with Nordic roots.
So let's make a clear statement at the beginning: The economic downturn in the Nordic countries as a result of the pandemic is significantly lower than in the rest of Europe, therefore they show a high pandemic resilience compared to European counterparts. The Nordic countries, in general, are relatively well equipped to deal with recession risks, as Finland, Sweden, Norway and Denmark have some of the healthiest public finances in Europe and ample space to ease fiscal policy furthermore. Fiscal policy supports the economic recovery, while property markets benefit from monetary policy measures, but economic risks still remain.
- The total transaction volume in the first half of 2020 stands at EUR 16.1 billion, which is 14% less than previous year, but a solid result in view of the pandemic. After a good first quarter, investment market activity decreased significantly during the second quarter.
- A strong demand can be observed for core properties and public tenants in prime locations with low rental income risks, therefore public properties, residential rental properties and prime logistics segments are focused. Increasing financing costs and credit margins related to high-risk property segments are expected.
- Residential transaction volume has increased significantly compared to the previous year up to 32% and made living to the most sought-after asset class in the first half year 2020, followed by the office sector standing at 29%. The share of international investors shrank from 35% in 2019 to 29% in H1 2020.
- Sweden achieved the highest transaction volume of all Nordic countries with EUR 6.7 billion in total numbers. Norway recorded the sharpest decline amounting to 22%, followed by Sweden (-14%) and Finland (-13%) while the decline has been moderate in Denmark (-2%).
- Market activity in Finland decreased significantly during the second quarter to EUR 400 million after a record-high first-quarter volume at EUR 3.0 billion. Prime yields increased slightly in the Helsinki metropolitan area after a long period of decrease. In the growth centres, the yield requirements remained mainly unchanged. In the Helsinki metropolitan area, retail vacancy rate decreased from 2.9% to 2.8% during the first half of the year.
- The diversification potential in the Nordic countries remains high due to the heterogeneous yield structure. We expect further increasing interest of international investors on the Nordic property market, not least because of the structural stability in the long term.
As you can see, the Nordic markets are not in the eyes of investors for nothing. So winter may come.