Even lower interest rates, higher risk appetite, good access to financing, as well as a low risk of vacancies have resulted in yield requirements for properties continuing to decline in 2015. Despite historically high property prices, Newsec believes that the probability of a strong downward adjustment of property values will be low in the coming period. At the same time, a new record year has been predicted for the Swedish transaction market in 2015.
Additional fuel has been injected into the property market as the Swedish Central Bank continued to reduce the key interest rate to a historically low - 0.35% in July 2015, resulting in an even more advantageous market environment for the property sector.
“In spite of the recent volatile period in the global capital market, we believe that properties will remain an attractive asset class for the foreseeable future, despite an extensive period of increasing property prices. The interest rates are historically low and there is a surplus of liquidity in the system, the Swedish Central Bank will also find it difficult to make significant changes to its monetary policy since this would hamper growth”, Jakob Pettersson, Head of Research, Newsec.
Domestic investors have dominated the transaction market during the year. However, there is clear interest from foreign capital, particularly pension capital, in the Swedish property market, since it delivers a better risk-adjusted return compared to other property investments in the rest of Europe.
“With respect to market segments, we believe that public properties have grown to become the most attractive area for the more risk-averse investors. This segment is characterised by a long-term approach, with a stable yield in relation to risk. The transactions in the segment are expected to increase as municipalities are becoming more eager to divest portions of their existing portfolios, and are open to the possibility of private companies being responsible for new builds of, for example, schools and residences for the elderly,” says Jakob Pettersson, Head of Research, Newsec.
Resource: Newsec
