Residential Real Estate Market in Scandinavian Countries - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Residential Real Estate Market in Scandinavian Countries - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Scandinavian countries are growing rapidly and are projected to be among the fastest-growing cities in Europe in the future. Rising house demand has not been matched by construction over a long period, due to taxes, regulation, and lack/mismatch of incentives. However, the increase in population and immigration is expected to bring growth in the housing market in countries, such as Sweden and Norway.

The Swedish economy grew by about 2.3%, in 2018. The country faced a declining demand in 2018, and the total number of new houses sold in the country declined by 4.9% Y-o-Y to 52,599 units. The outlook for 2019 is not very bright, as the country is likely to witness a decrease in residential construction. Areas, like the Greater Stockholm, saw a sharp decline of around 35% in the housing construction. However, Sweden is witnessing an increased interest from international investors for rental apartments.

Norway’s economy grew by approximately 1.8% in 2018, and it is expected to grow by 2% in 2019. The residential market in Norway is shaped by a long-time policy goal of homeownership, and up to 85% of citizens have their own home, which is usually less taxable. Norway’s housing market has been witnessing a steady decline in housing prices. However, the Norwegian residential real estate market is stabilizing, since the last quarter of 2019, due to increasing interest rates and stricter mortgage rules. The country witnessed an increase of 4.6% in the residential property sales to 65,214 units, in the first three quarters of 2019. The supply of new homes has varied, but the larger cities, like Oslo, have a fair supply of previously industrial sites being changed to new residential areas. Additionally, some municipalities bordering the big cities, especially Oslo, have zoned a lot of new residential plots that attract a high demand.

In 2018, Denmark’s economy grew by around 1.2%, and the economy is expected to expand by 1.6% in 2019. The country is currently facing a housing shortage, and residential construction is not keeping up with the growing population. The problem is intense, especially in cities, such as Copenhagen. However, the country is experiencing a rising demand for purpose-built rented accommodation.

Key Market TrendsShortage of New Housing Units in Scandinavian Countries likely to Increase Demand

The Scandinavian countries are facing a shortage in the housing units and the issue is more prominent in the Swedish housing market, primarily in its metropolitan regions. The level of additional new homes has been very low, while population growth has been high and, and according to the forecast, this is likely to continue.

Housing prices in Sweden are decreasing due to strict mortgage requirements, deteriorating investor confidence, and slowing economic growth. Sweden’s nationwide house price index fell by 1.53 in 2018, in contrast to Y-o-Y increase of 7.57% in 2017.

However, in Denmark, the house prices continue to rise, despite the falling demand due to the introduction of tighter lending standards and slowing economic growth. The price index of one-family houses in Denmark increased by a modest 3.28% in 2018, after Y-o-Y increase of 4.01% in 2017.

Norway’s housing market is currently witnessing a stable demand. However, the country has weak construction activity, stricter mortgage rules, and gradually rising mortgage rates. The country’s house price index increased by 2.27% during 2018, after Y-o-Y increase of 0.73%, in 2017.

An increase in housing price indexes in these countries is likely to boost investors’ confidence in the Scandinavian countries, which is likely to increase demand for new housing construction.

Rising Demand for Rental Apartments in Denmark

Among the Scandinavian countries, Denmark has shown a rising trend for rental accommodation. Rental housing in Denmark serves different social groups, from low income to medium income groups.

Urban markets with restricted land resources, strict zoning regulations, and having housing shortages drive up rents and reduce accessibility to the social housing. These factors are acting as a driver for the private rental housing sector for low- and middle-income groups.

In 2019, the average house rent for general housing in Denmark was 833 DKK per m2, which is higher than the previous year. The rental yields in Denmark have also recovered in the recent years, as rents have risen faster than house prices. The average gross rental yields in Copenhagen typically range from 4.84% to 5.31%. In family housing, the average rent of houses increased to DKK 811 per m2 in 2019, as compared to DKK 802 per m2 in 2018. In older homes, the average rent increased by 0.6%, in 2018. In youth housing, the average rent increased by 1.3% to DKK 928 per m2. By comparison, the average rental price levels witnessed an increase in 2018.

Competitive Landscape

The residential real estate market in Scandinavian countries is competitive. Competition and pricing have increased strongly, and new investors and developers have entered the market. Moreover, both demand and supply of real estates are increasing. Interest rates and financing terms are creating a very attractive investment environment for the companies.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies Mentioned

IBM Corporation
Oracle Corporation
Internap Corporation
Packet Inc. (An Equinix Inc. Company)
Scaleway Inc.
Amazon Web Services Inc
Rackspace Inc.
CenturyLink, Inc.
LightEdge Solutions, Inc

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