The Nordic real estate market's strong fundamentals are resulting in increasing volumes of foreign capital targeting locally listed property companies, creating stock market premiums, says new research from Brunswick Real Estate’s investment banking arm.
'Our research shows that the listed real estate sector’s relative importance increased substantially over the past 20 years. The market capitalisation of listed real estate companies, as a percentage of the total stock market capitalisation, increased from 2.2% in 1996 to 4.5% in 2016, resulting in more attention from money managers, stronger demand for the sector and thus a higher valuation,' commented Erik Gärdén, partner of Brunswick Real Estate.
According to the data, total market capitalisation increased from 17% in 1997 from foreign sources to 25% in 2015, with growth accerlating over the last five years mainly due to already-present global money managers increasing their exposure to Swedish listed property.
'Listed real estate is probably the fastest and easiest way for foreign investors to get exposure to the Swedish real estate market, and a stronger demand from abroad should thus lead to an increase in share prices before that demand impacts prices on the direct market, thereby creating a premium,' said Peter Leimdörfer, co-managing partner of Brunswick Real Estate.
In the period tracked by the research, the total market size quintupled and foreign interest in Swedish stocks grew considerably, catering for continued capital inflow to listed real estate, the report said.
'The strong and increasing interest in Swedish real estate is an indication of the sector’s attractive fundamentals, which supports our business model to be the local partner for international investors seeking exposure to Nordic real estate. On the back of the very strong performance for Swedish listed real estate, however, the most attractive opportunities might currently be found in Finland, where companies come at a more attractive valuation than in Sweden,' concluded Leimdörfer.
