In Europe’s Wealthy North, Property Deals Just Hit a Record

The Nordic property market is hotter than ever, as a growing number of international investors compete to get a foothold before it’s too late.

Newsec, a Nordic property adviser and asset manager that looks after more than $80 billion in client funds, says the number of real estate transactions in Europe’s rich north is likely to jump more than 10% this year to a record $60 billion. That’s roughly on par with the U.K. market, which has a population twice the size of the Nordic region’s.

Max Barclay, head of Newsec advisory, says he’s never before fielded such interest from investors. The Nordic region may be small, but it’s rich, it boasts stable politics and has a highly educated population, all of which are parameters that are attracting investors eager to find steady, long-term cash flows against a backdrop of ultra-low interest rates.

“Those things shouldn’t be underestimated when it comes to attracting capital,” Barclay said.

In Sweden, the biggest Nordic economy, 46 billion kronor ($5.3 billion) in property deals were struck in the three months through March, marking the strongest first quarter ever, according to Newsec.

Meanwhile, Swedish home prices keep breaking earlier records every time there’s fresh data. Single-dwelling units soared an annual 17% to their highest level ever in March. Sweden’s finance minister, Magdalena Andersson, says the development warrants action to ensure a reasonable balance between supply and demand.

Government Action

“It’s obviously something we need to keep an eye on,” she said in an interview on Thursday. Andersson pointed to the effects of the pandemic on spending habits, with more people putting money into their homes than into goods and services over the past year.

But steps are now needed to ensure the housing market doesn’t boil over. “We are taking measures, mainly to increase supply of housing, such as the investment support for new housing construction,” Andersson said.

Finding commercial property to buy is proving increasingly difficult. A bidding war for Norwegian office provider Entra ASA left its suitors empty handed earlier this year. Entra, whose owners include the domestic sidekick of Norway’s giant sovereign wealth fund, said it would rather stay independent given the opportunities for growth. Swedish property firms such as Castellum AB, SBB and Fastighets AB Balder are now hunting around for other places to put their cash.

Blackstone Group Inc., which has been building its Nordic presence in recent years, has had its eye on warehouse and logistics properties in particular. But its latest bid to take over such assets from Castellum fell short as supply in the region tightens.

Barclay says some listed property companies in the region are still trading at a discount to their portfolio values, which makes them attractive targets for acquisitions. He also warns that supply will continue to fall, as large institutional investors such as Nordic pension funds fill their portfolios with real estate. He points to Oslo as a prime example, with 67% of the capital city’s office property already controlled by long-term investors.

Newsec estimates that institutional investors will own about 20% of the market by 2030, compared with roughly 12% today.

“This won’t change market activity in the very short term,” Barclay said. “But over a 4 to 5-year horizon, it will have an impact on volumes.”

©2021 Bloomberg L.P.

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