IPD today published the SFI / IPD Swedish Residential Property Index for 2008. According to the index, investment in Swedish residential property was 4.9% last year, falling from 9.3% in 2007 and slipping into negative returns for the first time in the index's six-year history.
Residential Swedish property underperformed the commercial market, which returned -3.3%, according to the SFI / IPD Swedish Annual Property Index. The index, however, performed far better than the equities market, which returned -39.5%, but considerably lagged bonds, which recorded 15.7%.
Sweden's residential market is divided into three sectors; central Stockholm, which returned -4.7%, rest of Greater Stockholm, which recorded the worst returns for the year at -5.4%, and the rest of Sweden, which fared the best, at -4.6%.The increase in yields had a strong negative impact on capital values, which fell by -7.7%. This was the principal driver behind the year's poor returns.
Over 2008, modest insulation on returns was provided by a robust income stream across the residential subsectors, with an All Residential average of 3.1%. Long-term annualised total returns were still positive with three and five year performance at 6.2% and 8.3%, respectively.
Christina Gustafsson, Managing Director IPD Norden said: "The Swedish Residential market has suffered capital values declines due to a yield shift of 40 basis points across the three regions. This was also evident from the Swedish commercial property market, which also fell by 8%."