Swedish Property Dealmaking Hits Record Even Amid Rates Worry

(Bloomberg) --

The volume of commercial property transactions in Sweden hit its highest level on record during the first three months of year, even as the specter of rising rates began to stoke concern among investors and analysts.

Properties valued at 53.6 billion kronor ($5.6 billion) traded hands in the first quarter, according to data compiled by Newsec Property Management AB. That’s also 3% higher than in the same period of 2021, the busiest year ever for deals. 

“It’s remarkable considering the war in Ukraine, high inflation and rising rates,” Max Barclay, head of Newsec Advisory, said in an interview. He added that the outlook is “very good” even though some investors new to the Nordic market have become “a little more hesitant.”

That hesitancy comes amid a spate of negative commentary on the Swedish property sector in recent weeks amid accelerating inflation and rising credit market costs. Last month, analysts at Svenska Handelsbanken said in a note “things are set to get chillier” for the property industry, while Danske Bank said on Wednesday that sectoral earnings “may come under pressure.”

Outside Interest

Still, those concerns don’t appear to have yet stymied interest from international investors, who this year have been snapping up euro-denominated bonds by issuers such as Samhallsbyggnadsbolaget i Norden AB, Fastighets AB Balder and Castellum AB.

The wider Nordic region saw property transactions totaling 15.4 billion euros ($16.7 billion) complete in the first quarter, marking an increase of 59% from the previous year’s tally, according to a report by Pangea Property Partners. Among the biggest Nordic deals were a joint venture set up by Allianz SE and Heimstaden AB, as well as the 5 billion kronor deal between ICA Fastigheter and Bonnier Fastigheter, Pangea said.

In Sweden, residential properties represented the highest sub-sector for dealmaking in the first three months of 2022, equating to a third of volumes, followed by public properties with a fifth of the volumes, according to Newsec. 

Despite the recent increases in market interest rates, Newsec’s Barclay says that “the interest to invest in real estate in the Nordic region is still very high, and access to capital continues to look good.” 

Read More: Swedish Home Prices Rose 1.6% on Month in Feb.: HOX/Valueguard

©2022 Bloomberg L.P.