Real estate market outlook 2024

Real estate transaction volumes are expected to increase during 2024, assisted by a clearing interest rate outlook.* The first signs of a recovery in the real estate investment market have already been seen in the listed real estate market, which looks like it bottomed out in October 2023. Historically, direct real estate investments, which includes UB Nordic Property Fund (AIF), have followed the listed real estate market with a 6–12-month delay.

The first signs of a recovery in the real estate investment market have already been seen in the listed real estate market.

Jaakko Onali, Portfolio Manager, UB Nordic Property Fund (AIF)

The long interest rates used for financing by many professional real estate investors have already fallen well below the peak levels of autumn 2023. At the same time, real estate yield requirements have risen and the yield gap, which describes the difference between interest rates and real estate yields, has finally started to widen. In addition, the index increases in rents at the turn of the year are supporting the growth of the yield gap, which remains at a good level, especially in real terms, i.e. when taking inflation into account. In summary, falling financing costs, rising yield requirements and rental indexation mean that the pressure to write down property values is diminishing and will gradually disappear. The transaction market remained quiet in 2023, but we have seen increased interest, particularly from foreign investors in the Nordic countries. Considering the above, there is potential for an upturn in activity.

The ingredients for a recovery in the real estate market in the current year are clearly in place.

Perttu Hokkanen, Portfolio Manager

In the housing market, trading volumes were on the rise at the end of 2023. The increase is partly explained by the fact that the asset transfer tax exemption for first-time buyers was abolished at the end of 2023. Migration to cities was strong during 2023, and this trend is expected to continue. Housing construction is at a record low, with almost no new housing starts expected in 2024. There will be a shortage of housing in the future, and this will lead to a rise in house prices.

In the light of current data, we see that the ingredients for a recovery in the real estate market in the current year are clearly in place. It is too early to say at what point in the year the turnaround will take place, however. At the same time, this probably means that the best time to buy property is now or will be in the near future.

*Source: Colliers 1/2024 and KTI 11/2023

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The information presented is based on UB’s own estimates and sources considered reliable by UB. The information on which the conclusions are based may change quickly and UB Group may revise its market view without prior notice. No information obtained through this presentation should be construed as a solicitation to invest. When making investment decisions, readers should base their decisions on their own assessment of the investment and the risks involved, and to consider their personal goals and financial situation.

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