The Nordic property markets will continue to perform well but faces new challenges, according to the new report Pangea Property Outlook 2017/2018.
Pangea says that the winners will be segments with continued rental growth, such as attractive offices in the capital regions, while there is upward yield pressure on interest rate sensitive properties. Transaction activity is expected to be record high in 2017, but slow down slightly in 2018.
'The Nordic transaction volume seems to hit almost €45 bn in 2017, the highest level ever recorded,' said Mikael Söderlundh, partner and head of research at Pangea Property Partners.
The volume is driven by increasing activity in Norway, Denmark and Finland, with the latter two having way over 50% foreign buyers. Sweden remains the largest property market in the region, but the volume is down about 30% from 2016.
'In 2018 we expect a general slowdown on the Nordic transaction market, but from very high levels. The main reasons are fear of higher interest rates and new tax reforms in Sweden,' added Söderlundh.
According to the report, property yields have bottomed out in most segments, and the key value driver going forward will be rental growth. In particular, office rents in Stockholm will continue to increase, and the Oslo market is expected to follow. Logistics and hotel properties also have a favourable outlook, driven by strong occupier demand.
'Most hotel markets are performing well and there is increased investor demand across the line,' said Bård Bjølgerud, CEO and partner at Pangea Property Partners.
The largest buyers are expected to be institutional investors, major property companies and property funds, according to the report. Private investors, developers and public sector companies are pinpointed as net sellers. In addition, the share of foreign buyers is expected to remain high, driven by stable and well performing Nordic economies.
'We see strong interest from offshore investors, such as global core funds pushing down yields further on high quality assets. There is also strong demand for large corporate deals among value add investors,' Bjølgerud said.
Pangea Property Outlook on the Nordic property market is produced by Pangea Property Partners twice a year.
