Low inflation, 0% interest rate and moderate economic growth will set the stage for another good year for properties, according to the Real Estate Market Outlook 2020 for Sweden, published today by the global real estate advisor CBRE.
The Swedish population will grow by 6.6% until 2030. As the population aged 65+ will grow 14%, the need for investment in public sector properties will increase dramatically. We believe interest for public sector properties will remain high in 2020, as the sector continues being an interesting alternative to government bonds. Higher yielding, and with similar countercyclical properties, will continue to hold attractions for investors.
Less people are in the “pension savings age” in Sweden than in a global perspective, which might mean a relatively smaller influx of capital to our institutions than global ones. GDP growth is forecast to be slightly higher in 2020 than during 2019. A slightly stronger SEK is also expected, on average. But as the currency remains weak in a historical perspective and Sweden remains one of the European countries with the best five-year
GDP growth potential, we believe this will appeal to international investors.
Investors will also likely be pushed further out on the risk spectrum, with converging yields and narrowing risk premiums as a consequence. We believe in strong M&A activity in 2020.
On the back of strong office employment growth and modest near-term supply, we believe rental growth in the office sector will continue, but at a slower pace in 2020. For retail and logistics, convenience will continue to be key, whether it concerns fast deliveries or opening stores in transport hubs. Experiential Instagram-friendly environments will help drive footfall.
For the residential sector, construction will continue to be sluggish in 2020. Investor interest in the sector will continue to be high in 2020 due to the stable risk-adjusted returns.
Amanda Welander, Head of Research Sweden & Nordics, said:
“Many investors will continue to invest in line with ongoing mega trends, such as e-commerce, city growth and an ageing population.”