Demand for Swedish multi-family assets set to increase, says Savills
According to Savills, demand for Swedish multifamily (residential) assets is set to increase as investors seek a stable income in a safe market due to the ongoing Covid-19 pandemic.
Between January and September 2020, multifamily assets worth SEK35.5 billion (EUR3.4 billion) were traded, reflecting a market share of 27 per cent. The sector is on track to be the preferred asset class for investors for the fourth year in a row.
Savills notes that foreign investors have increased their activity within the residential sector over the past few years considerably. In 2019, foreign investors accounted for almost 60 per cent of the investment volume. The high proportion was partly driven by Vonovia’s SEK20.2 billion (EUR1.9 billion) acquisition of Blackstone’s majority share in the listed Swedish residential company Hembla.
Data analysed by Savills shows that there is a housing shortage of 640,000 homes for the period 2018 - 2027, the equivalent of 64,000 new homes per year, with the current development pipeline insufficient to satisfy demand. The need for new housing is estimated to be highest in the three large metropolitan regions. Stockholm, Gothenburg and Malmö need 288,000, 101,000 and 100,000 new homes respectively.
Niklas Zuckerman, Head of Investment at Savills in Sweden, says: “Over the last few years we have noticed an increasing appetite from foreign institutional investors, especially for new multifamily developments. Residential assets are perceived to generate an attractive risk adjusted return, due to the low vacancy risk.”
“This return on investment is far more attractive than the yields from fixed income products given the Swedish 10-year bond offers -0.3% and is also higher than the yields found in the prime office and high street retail markets. The Swedish rental system gives investors clear conditions regarding an asset’s future net operating income which is a key advantage in these times of uncertainty.”
Peter Wiman, Head of Research at Savills in Sweden, says: “Competition will intensify in the multifamily sector driven by the launches of new residential funds across Europe.
“The mismatch between the volume of capital that will be targeting the sector and the lack of available product should lead to more forward funding deals and development initiatives. The Swedish multifamily sector will continue to offer secure, long-term income streams.”