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Sweden a “safe haven” in property financing

Last week representatives from SBP Nordic visited Business Arena in London where main focus was on property investing in the Nordic countries. The impressions where of course many and in this blog we will try to give you a short summary of the Nordic countries from an investors perspective.

In general, the Nordic economies have a “safe haven” status (safe harbor) at outsiders and are characterized by political stability, transparency and reliable regulations that are effectively implemented in practice. Real estate investments can be structured in many different ways, which for several reasons appeal to a wide range of different types of investors. Everything from direct investments through property acquisitions, purchase of shares / bonds in real estate companies to the growth of crowdfunding of real estate projects that have positive effects to make sound real estate investments more accessible to a larger amount of investors.

In recent years, interest in real estate investments in the capital / metropolitan areas in the Nordic region has grown strongly among foreign institutional investors. The return profile for real estate investments from the acquisition of major commercial properties (offices, hotels and retail premises, etc.) is in many cases very well in line with the institutional investors’ criteria. Primarily, a large volume of long-term investments with a relatively low loan-to-value ratio (30-50%), predictable cash flows and an annual return in the range 4-7% are sought for over time, while real estate investments in the Nordic region provide desirable geographical diversification for institutions that have base in other parts of the world.

 

In general, the Nordic economies have a “safe haven” status in Europe

Everyone is most familiar with their own home market. Regional differences in everything from rules, taxes, market structure, business culture and price level can constitute both uncertainty and obstacles. How the property market is structured can vary greatly from one country to another. Of course, within a single country, large regional differences can exist when it comes to supply, demand and price levels for different types of properties. Both national and regional market differences can be difficult to analyze and observe for an outsider, which means that the need for local partners is great for having the opportunity to implement successful real estate investments. This applies both to foreign institutional investors and hundreds of billions to invest as well as to an individual saver who want to spread their risks by also including real estate investments in their savings.

For relatively smaller economies, such as the Nordic countries, where the real estate market is dominated by a few major players and “everyone knows everyone” it can be challenging for outside institutional investors to even be “invited to the table” in order to have the opportunity to make a deal regardless of whether the availability of capital is a problem or not. From this, here too, the importance of a trusted local partner is of paramount importance to unlocking interesting investment opportunities.

The members of SBP Nordic are spread all over the country and soon the whole of Europe and we know that many people appreciate the extensive analysis and due diligence that our transaction team does before a project comes up for funding on the platform. Property projects with a large geographical spread are financed through the platform and in each case analyzed and accounted for, among other things, location / area for the project property, local supply and demand, which makes it easier for potential lenders to acquire a good decision basis for their investment decision.

Based on what has been discussed above, an interesting conclusion is that the possibility and availability of successful real estate investments is largely due to reliable collaborative partners, regardless of whether it is a property acquisition in the billion-class or a part-financing of a healthy property project through a crowdfunding platform.

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