Increased bank lending and a growing investor interest in alternative financing will have a positive impact on future transaction volumes according to the latest research report by Savills.
The international real estate advisor notes that in the first quarter of 2013 alone SEK 3.9 billion (approx. €470 million) of bonds were issued by listed property companies, compared with SEK 6.8 billion (approx. €810 million) in the whole of 2012. In addition to bond issuances, further alternative sources of debt to traditional bank lending in Sweden include seller financing, paying with own stock and issuing preferential shares.
Johan Bernström, head of investment at Savills Sweden, says: “Bank lending is slowly picking up in Sweden and margins have been reduced slightly although it is still quite scarce for non-prime properties. However, we are seeing significant interest in alternative sources of financing to fill the gap in the market which should boost investment volumes after a slightly weaker first quarter.”
Savills data records the total transaction volume in Q1 2013 at SEK 16 billion (approx. €1.9 billion), representing a 40% decrease compared with the same period in 2012. Buyers continue to focus on prime assets across all sectors, particularly prime offices in Stockholm, Gothenburg and Malmö as well as residential and public properties. Due to the ongoing strong investor preference for prime product the firm expects prime yields to remain stable in the coming months. In Q1 2013 all prime yields remained unchanged quarter-on-quarter, standing at 4.75% (Stockholm offices), 5.00% (Gothenburg offices), 5.50% (Malmö offices), 5.75% (retail warehouses), 5.25% (shopping centers) and 6.50% (logistics).
Peter Wiman, head of research at Savills Sweden, says: “We are continuing to see high demand for prime stock in Sweden however with decreasing supply levels for this type of product we could see an increased level of investment activity for best secondary properties going forward. Sweden’s solid public finances and growing economy make it an attractive investment destination and it remains a top five European market in terms of investment turnover.”
Sweden’s investment market continues to be heavily dominated by domestic investors, who accounted for all transactions except one small deal in Q1 2013 and 84% of all acquisitions in 2012, according to Savills report. Nonetheless, the firm has observed strong international interest in Swedish real estate from countries including UK, Germany and Norway.