A positive economic outlook and a continued market growth make Sweden's investment market attractive for investors at home and abroad in 2011 according to international real estate advisor Savills.
The firm reports that by the end of Q1 2011 total turnover reached SEK 19.5 bln. (2.18 bln.), up from SEK 18.5 bln. (2.07 bln.) in Q1 2010. This quarterly upward trend began last year as investment volumes increased each quarter in 2010 compared with the same quarter in 2009 according to Savills. In addition the volume of retail assets sold in Q1 2011 has already reached half the 2010 year total, at SEK4.3 bln. (480 mln.).
Overall Sweden's GDP has grown every quarter since Q1 2010, a trend which continues into 2011 with a positive GDP growth of 5.5% expected by forecasters.
Peter Wiman, Head of Research at Savills Sweden, says: "The strength of Sweden's economic recovery in 2010 surprised forecasters and at the end of 2010 turnover totalled SEK 115 bln. (12.86 bln.), double the level reached in 2009. Today most of the Swedish macro-economic indicators are positive or have a very positive outlook."
He adds: "Prime yields hardened within all property segments throughout 2010 and we have started to see slight closing signs of the yield gap between prime and secondary properties, driven primarily by the strengthening office leasing market, relatively low vacancy levels, the limited development pipelines and the lack of product on the market. We expect to see yields remain stable in most segments in 2011 and forecast that retail yields could strengthen further."
Savills researchers note a strong interest from international investors in Sweden but say the market is still predominantly driven by domestic players such as Swedish institutions and pension funds. The international real estate advisor has also observed a slight shift of investors' interest from commercial properties to residential assets, with the transaction volume of residential properties representing 42% of the total transaction volume in 2010. Savills explains this record breaking volume by a number of large portfolio transactions with domestic pension funds as buyers. The firm expects investors' appetite for commercial property to continue to increase following a 137% growth in the commercial property volume between 2009 and 2010.
Despite problems within the banking sector, which have made financing more difficult and expensive, Savills reveals that predictions of banks foreclosing on loans did not come true and that there were only a few forced sales, which amounted to approximately SEK 10 bln. (1.12 bln.), roughly 8.5% of the transaction volume in 2010.