A solid economic outlook with competitive growth, strong labour markets and weak local currencies points toward another strong year for the Nordic property market in 2019. However, higher interest rates and lower rental growth in some markets are some of the main threats, according to the new report Pangea Property Outlook 2019.
While the European transaction volume fell by 15 percent in 2018, the Nordic property market grew to €43 billion, the second highest volume ever. Pangea Property Partners foresees another strong year in 2019, forecasting a transaction volume of about €40 billion, partly driven by portfolio and corporate deals and large inflows of foreign capital.
This means the Nordic property market punches well above its weight. While the region is home to about 5 percent of the total EU population, the property transaction volume in 2018 was about 16 percent of the EU total.
“Despite global headwinds in the form of declining global growth and rising interest rates, we expect another strong year for the Nordic property market, not least because the Nordic countries are experiencing solid growth, robust public finances and strong labour markets on the one hand and weak currencies on the other”, said Bård Bjølgerud, CEO and Partner at Pangea Property Partners.
The net capital inflow to the Nordics in 2018 was €5.7 billion, and foreign buyers represented 39 percent of the volume.
“Depreciation of the Nordic currencies makes the markets attractive. Over the past years the currencies of Sweden and Norway have depreciated about 40 percent against the dollar and almost 20 percent against the euro,” added Mr. Bjølgerud.
While the markets in total are performing well, there are significant variations between sectors.
“The office segment is strong overall, but we see prime rents in Stockholm deaccelerating and the residential construction companies in Sweden are struggling. As in 2018, we foresee a very clear divide between logistics, which is hotter than ever, and retail, which is not, reflecting expectations of more and more shopping moving online,” said Mikael Söderlundh, Head of Research and Partner at Pangea Property Partners.
“In total, the listed property sector is valued close to net asset value, but there are large variations between countries and segments. This creates opportunities and may trigger further M&A activity,” said Mr. Bjølgerud.
Pangea Property Outlook 2019 is a report about the Nordic property market, produced by Pangea Property Partners. The report is attached.