A strong but fragmented property market

The transaction volume in the Swedish property market during 2018 amounted tomore than SEK 155 billion, which exceeds the 2017 figure of SEK 151 billion, and thus further establishes the position of the Swedish property market as one of themost liquid in the world. Fewer transactions took place during 2018 compared with the previous year, but in terms of size the transactions have been bigger. This is according to a press release published by Newsec.

“Newsec believes that the first quarter next year will be strong, and we predict that the transaction volume for 2019 will end up being around SEK 150 billion. Weare seeing a significant reduction in the valuation of property companies’ net asset value, and we predict that the year will be characterised by large structural transactions and that many companies will choose to streamline their portfolios”, says Max Barclay, head of Newsec’s Swedish advisory operations.

However, we are seeing a certain fragmentation of the Swedish property market. While rent levels for office space in areas such as Stockholm continue to be high, residential property developers are finding things tougher, and it may be difficult to sell tenant-owner apartments on a sluggish market – despite the strong trend of urbanisation and a continuing housing shortage.

At the same time, the market for rental properties continues to be strong. There is a housing shortage in 243 of the country’s 290 municipalities, and according toBoverket there is a nationwide need for 700,000 residences by 2025 – volumes we have not seen since the days of the Million Programme in the late 60s and early 70s.

Consequently, this major need and the high volumes of residential property it entails will require a readjustment from the 25,000 or so residences that were produced a few years ago to three times that number in the future. This also entails an economic and financial challenge, since a large part of the anticipated future household growth will take place in the groups where the economic conditions are often limited.

Even if these groups do not need to have their housing needs immediately satisfied in the form of new production, it does still impose demands on well-functioning property chains that generate residences that can then satisfy new demand. Increased construction levels also impose demands on infrastructure, which needs to be dimensioned to cope with a higher level of demand.

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