For many years, international investors were net sellers in the Nordic property market. That changed in 2017, a year when foreign buyers – representing both core and value-add capital – net invested more than EUR 10 billion in Nordic real estate. The next year, in 2018, the figure was EUR 6 billion. And so far in 2019, foreign buyers have net invested another EUR 1 billion. So, three consecutive years with large capital inflows. Why do we have this strong trend, and will it continue?
First, we can see that there are many reoccurring foreign buyers, coming back time after time with new mandates and funds. Apparently, they know the Nordic market very well and appreciate the stability, liquidity, transparency and overall business climate – that’s why they are returning. Adding to that, the Nordic market has performed strongly, with very competitive real estate returns, and now the local currencies, especially the SEK and NOK, but also the EUR, have depreciated significantly against the USD. When we travel abroad and find everything very expensive suddenly, it’s the opposite experience for foreign investors coming to the Nordics – it feels cheap right now. And it’s a pretty good chance that the currencies will strengthen up to the point of an exit in say 5-10 years. Another contributing factor to foreign investors becoming large net buyers in recent years is a broader investment scope, and in particular more focus on residentials. In the last 12 months, foreign buyers have acquired residentials across the Nordics worth EUR 4.6 billion. Just a few years back, the volume in the residential segment was close to zero. We also see a very strong interest for logistics and warehouse properties, with several sizeable portfolios changing hand recently, and the foreign buyers putting downward pressure on yields.
Going forward, we believe that the international appetite for Nordic real estate will remain strong as long as the underlying markets are performing well, and we see no sudden change around the corner. On the contrary, there are constantly new buyers adding the Nordics to their investment universes, and the ever-increasing uncertainty around Brexit makes the Nordic region extra interesting.
Head of Research and Partner
Pangea Property Partners