Savills reports moderate slowdown in Swedish real estate transactions
The second quarter of 2020 will be the first quarter of the year showing a clearer picture of the impact of Covid-19 on the Swedish real estate market, according to Savills. Despite widespread uncertainty in the market, real estate transactions amounted to SEK36 billion (EUR3.4 billion), a decrease of 35 per cent compared to Q2 2019.
Liquidity continues at relatively high levels and the number of completed transactions only fell by 10 per cent compared to the corresponding quarter last year.
Peter Wiman, Head of Research at Savills in Sweden, says: “Although the slowdown seems substantial, it doesn’t when compared to 2009, when the average transaction volume was just over SEK14 billion (EUR1.3 billion) per quarter and during the worst quarter the volume was only nine billion SEK. Even though many sectors of the property market have been affected in various ways, today’s market is in many ways more solid compared to the years of the financial crisis.”
Investment volumes for the first half of 2020 were close to SEK102 billion (EUR9.7 billion), which was an increase of just over one percent compared to H1 2019, according to Savills. The high transaction volumes during the first quarter of the year can partly be explained by the acquisition of the listed company Hemfosa.
During the second quarter, residential and public properties accounted for more than half of the quarter's transaction volumes and, so far this year, investment in multifamily is close to SEK25 billion (EUR2.4 billion).
Niklas Zuckerman, Head of Investment at Savills in Sweden, says: “Due to the uncertain economic outlook, we see a growing interest in low-risk sectors, such as multifamily, public properties, logistics and office properties with long leases with the state or a municipality as tenants.”
Forward funding deals represent almost half of residential investment volumes and reached SEK12 billion (EUR1.1 billion) for the first half of the year. Throughout 2019, forward funding deals amounted to a record volume of just under SEK17 billion (EUR1.6 billion), which indicates that the year-end volume for 2020 will achieve new record levels.
Peter Wiman adds: “The high volume of forward funding deals is partly explained by a general growth in interest in building rental residential properties, but more likely it is a direct result of developers capitalising on the strong demand combined with a will to strengthen their own company’s finances by reducing tied-up capital.”