Positive sentiment and low interest rates are keeping the real estate sector buoyant even if there are clouds on the horizon, experts agreed at Real Asset Media’s European Outlook H2, which was held in Stockholm in early June.
‘The market will continue to be strong, everything is pointing in that direction now that the fear of higher interest rates has receded,’ said Olle Håkanson Nobel, Partner, Transactions, Croisette Real Estate Partner. ‘Even a downturn in the stock market doesn’t affect the property sector, because it is very solid at the moment’.
The prospect of ‘lower for longer’ interest rates is an important factor supporting real estate, said Nicole Bangstad, Research Analyst, Savills Investment Management, Sweden: ‘With monetary policy support the cycle has more to give. This has a strong impact on the Nordics markets and that is why sentiment on real estate is still positive, despite the gradual economic slowdown’.
After years of talk about the end of the cycle and a potential downturn, it looks like the cycle has been prolonged.
But there are no cheap deals to be had anywhere. ‘The market is very strong across the board but it is very expensive and we see further pressure on yields,’ said Nils Styf, CEO, Hemsö Fastighets AB, Sweden.
‘All the European markets are expensive now so if you are a core investor it’s all about rental growth,’ said Adam Irányi, Head of Investment Europe II, Union Investment Real Estate GmbH, Germany. ‘Yields are low and only rental growth can support them. We are happy yields are not declining further’.
Investors have to analyse the market carefully in order to find the rental hot spots.
‘We are big fans of Stockholm and Helsinki, because they have a very strong internal momentum,’ said Irányi. ‘They are the main markets we focus on in the Nordics and our team has put through our investment committee more assets in this area than in Paris, which is interesting’.
The interest stretches to value-add projects, where the Nordics offer interesting opportunities to purchase buildings that need repositioning and finalise the project within a short time-frame.
‘Since the beginning of this year we have set up an in-house dedicated specialised value-add team, which is not something people associate with Union as a large conservative core investor from Germany,’ he said. ‘We have allocated €500 mln over the next three years to invest solely in value-add projects across Europe, and so far most of the projects we have analysed have been in the Nordics’.
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