Svindal won the men’s downhill in Schldming, Austria and took third in the Super-G. He currently leads the World Cup Super-G standings
Human development index takes into account 3 dimensions: health, education, living standards. The higher the index, the better
Gini index measures the degree of income redistribution within a society. A higher value denotes a more unequal society. Typically Nordics countries tend to boast lower inequality index (i.e. wealth is spread more evenly across the population.
Transparency Internationalis a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide. The headquarters is located in Berlin, Germany but operates through more than 70 national chapters.The index
World Bank’s Doing Business Index takes into account various aspects such as, amongst others, difficulties in starting a business, getting credit, level of investor protection, etc..A flexible exchange rate has its pros and cons: pros economic adjustments need not to be made through internal deflation (wages reduction), control over monetary policy; cons more uncertainty around evolution of relative prices for example/ There is also a sentiment element in addition to macro factors: many investors see generally having an independent currency as something positive given the economic problems linked to the euro
The story here is the polarisation of property investment, with the larger and stronger Northern European countries continuing to attract the bulk of money flowing into property while other markets, especially in southern Europe, still deemed too risky by many investors and hence recording limited volumes
Q4 data not available yet for Asia Pac – so 2012 figure is Q1-Q3.Global transactions levels still running at less than 50% of 2007 peak.JLL estimates global direct commercial property investment for 2012 at $446 billion in 2012, 2% up on 2012. They expect 2013 to hit $500 billion
Western Europe dominates transactions volumes in EMEA. 2013 we anticipate a sligth improvement to c. €110bnScandinavia (Norway, Sweden, Denmark, Finland) slightly bigger share than CEE (13% vs 8% in 2012)
CRE Investment in the Nordics has more than doubled since 2009Sweden traditionally the largest and most liquid property market within the Nordics, other markets such as Finland or Denmark smaller and typically less transparentThe RCA data underestimates the true total volume of transactions as many deals go unreported and some remain confidential. Colliers estimates that 2012 Volumes in Norway were just over €7bn and just under €12bn for Sweden (including residential and development land)
Offices and retail traditionally most sought afterasset classes, industrial less liquid/developed market (?)2010 total was boosted by sale of Norway SC Portfolio to Niam Fund IV for ≈€ 600 International investors accounted for 7% of total CRE investment in 2012, compared to approx. 20% in Sweden the same year
Sweden investor among the most active cross border investors in the Nordics (e.g NIAM: they’ve completed quite a lot of acquisitions in Norway)Madagascar was a purchase of industrial property in 2009 (in case people want to know)
Norway property (includingresi) outperformed Eurozone and other large European markets between 2006 and 2011
Among the Nordics, only Finland did better over the same period….
“All property” yielded a 9.0% return between 2001 and 2011, outperforming Norwegian equities and bondsLow national bond yields make property an even more attractive asset classIndustrial was the best performing sector
Aberdeen, NIAM and Valad are also significant direct investors in the Nordics. Most funds are Scandinavian.A range of Core to Opportunity funds.NAIM, NREP and Nordika raised funds in 2012
The property market is essentially local and strong competition from local investors is often seen as an obstacle towards greater foreign buyers involvement Foreign investors dominated by Swedish and but also growing interest from UK and German buyersIndustrial less liquid assetBoom in resi market driving transactions
Commercial property main driver of bank loans to corporate sector High cost of debt finance for property investment an issue (lower LTVs, smaller loans, high margins) bond financing has emerged as an attractive option for some players
Large deal, overseas involvement , LTV of 70%, margin less than 250 basis points
Blue bars show developments over the past quarter. The red diamonds show expectations over the next quarter.Negative net balance denotes deterioration. Results are based on a survey. Change in credit standards reflects a variety of factors: economic outlook, sector risk, market share objectives, bank’s risk appetite, funding, capital adequacy.In Q1 2013, slight improvement expected in credit conditions for CRE compared to previous quarter but overall lending expected to remain tight Expectations for economy as whole better than for CRE.
The country has the largest SWF in the world and boasts an enviable economic situation : sustained economic growth rates, low unemployment and public debt and no pressure to increase tax this also supports the occupier market Transparency, cost of debt and the risk of a bubble in the resi sector are at present the main downsides
Transcript of "Norway presentation"
International perspective on the Norwegian property market Tony Horrell CEO UK and Ireland
What is Norway famous for?• Northern Lights• Fishing• Oil• Nordic games• Christmas trees (Trafalgar Square)• Morten Harket / AHA• Aksel Lund Svindal 2
Norwegian Icebreaker heads up the Mississippi River As you may have seen on the news its been very cold in Iowa, Wisconsin, & Minnesota. So cold, in fact, that the US Corp of Engineers has borrowed a Norwegian Icebreaker to clear the Mississippi River for freighter traffic. The Icebreaker is starting near Davenport and working its way northward for 3 months. Here is a picture as the hard work of ice breaking begins. Impressive! 3
Norwegian Icebreaker heads up the Mississippi River 4
Positive factors for Norway GDP per capita (PPP) 60 55 50 $12,700 higher than 45 the G7 average USD Thousands 40 35 30 25 20 15 10 1992 1997 1991 1993 1994 1995 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: IMF Norway UK Eurozone G7 EU27 5
Positive factors for Norway Human Development Index 0.96 Highest HDI in the world 0.94 0.92 0.90 0.88 0.86 0.84 0.82 Source: United Nations Development Programme 6
Positive factors for Norway Income Inequality – Gini Coefficient 50 Less inequality More inequality 45 40 35 30 25 20 15 10 5 0 Source: CIA 7
Positive factors for Norway Corruption Perception Index 100 90 80 70 60 50 40 30 20 Source: Transparency International 8
Positive factors for Norway• 6th easiest country to do business in for Small and Medium-size Enterprises – Doing Business Report 2013 (World Bank)• Prudent management of natural resources extraction and the subsequent oil fund• Flexibility of own currency and central bank• 5th largest merchant ships fleet in the world• Low unemployment rate (3% in September 2012) 9
International investment by sector International Investment in Norway by Sector 900 800 700 600 € Millions 500 400 300 200 100 0 2009 2010 2011 2012 Source: RCA Industrial Retail Offices 14
International investment International Investors in Norway by Nationality (2009-2012) 1,400 1,200 1,000 € Millions 800 600 400 200 0 Sweden UK US Switzerland Germany Madagascar Source: RCA Industrial Retail Offices 15
Outperforming compared to larger EU markets Europe: All Property Total Return (%pa) 2006-11 in Local Currencies Norway 6.5 France 6.5 IPD Eurozone 4.6 Germany 3.8 IPD Pan-Europe 3.5 UK -0.7 -2 -1 0 1 2 3 4 5 6 7 Percentage Source: IPD 16
Outperform the Nordic average Nordics: All Property Total Return (%pa) 2006-11 in Local Currencies Finland Norway Sweden Nordic Market Denmark 0 1 2 3 4 5 6 7 Percentage Source: IPD 17
All Property returns higher than Equities Norway: Total Returns (%pa) by Sector and Asset Class 2001-11 Industrial 12.1 Retail 10.7 All Property 9.0 Equities 8.7 Offices 8.1 Bonds 6.6 Inflation 1.8 0 2 4 6 8 10 12 14 Percentage Source: IPD, Oslo Bors, Statistics Norway 18
Investment market trends Local capital dominant Rest of Scandinavia (mainly Sweden), UK, US and Germany main sources of foreign capital Focus is on Oslo (53% of total volume in 2012) and other largest centres Office most traded commercial property asset type in 2012 (42%) followed by retail (34%) High demand for core properties...but lack of product a constraint Residential Investment also popular: residential boom; prices up 8.5% y/y in January; mainly private individual investors; banks keener on lending against resi to reduce risk and meet Basel III requirements Capital values stabilising 21
Debt market Lenders mainly local (DnB, Nordea, BN Bank, Sparebank 1 Gruppen) International active banks: Handelsbanken and SEB Norwegian banks exposure to CRE was NOK 446 billion (approx. 58 billion) as of q3 2011 292% of tier 1 capital and ca. 35% of corporate bank loans (40% of total loans) Credit standards for CRE expected to remain tight (source:Norges bank survey) Higher capital requirements main contributor LTVs: around 65-70% (80-90% before crisis) Financing above NOK 1 billion difficult; typically loans above NOK 300 – 400m are syndicated. Relatively high margins (>250 bps); no changes expected in the short term Bonds attractive source of financing, but predominantly for the larger players – and mainly deals > NOK 300 22
Example of debt-driven transaction Statoil’s 65,000 sq m in suburban Oslo Madison International (USA) bought 35% of the office building, fully-let to Statoil, for NOK 392 m (€53 m) Loan-to-Value ratio of 70% Arctic Securities was the syndicator of the equity and also organised the bond financing Margin is 220-230 basis points 23
Credit conditions Credit to CRE to remain tight Expectations for Q1 2013Source: Norges Bank 24
Strengths & weaknessesSTRENGTHS WEAKNESSES+ Strong economy, relative insulated from − Volatile exchange rate, tracks oil price Eurozone crisis fluctuations+ Oil as wealth generator − Full employment/skills shortage+ Very low sovereign debt (AAA rating) − High hedging costs+ Excellent physical and human − Less transparent than other infrastructure Scandinavian countries+ Low unemployment (ca. 3%) − High debt financing cost (margins >250+ No pressure to increase tax as bps) elsewhere in Europe − Risk of overheating of residential+ No transfer tax on sale of shares in market Norwegian or foreign companies holding real estate in Norway+ Positive rental growth outlook+ Favourable landlord act 25
Outlook 2013 Strong economic outlook: 2.8% GDP growth in 2013 (source: Experian) Positive economic and property market fundamentals justify growing interest from foreign buyers… ..in practice strong competition from local investors and limited size of the market remain an obstacle Tightening in financial regulation (Basel III, etc.) will negatively affect bank lending to CRE Share of bond financing to increase in 2013 as a result (to ca.30-35% of loan value) Lack of products will maintain downward pressure on yields despite difficult financing conditions – Prime office yields to remain stable between 5.5-6.25% More investors to move up the risk curve in search of higher returns as risk is re-priced Occupier market outlook stable 26
Our Global StrengthTop 3 global real estate services brand• 522 offices in 62 countries• 12,000+ employees• $1.8 billion in revenue• Over 90% “owned” revenues• $68bn transaction value• Over 2.1 bn square feet under management ** Includes FirstService Residential Management
International perspective on the Norwegian property market Tony Horrell CEO UK and Ireland
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