PROPERTY IN UNCERTAIN TIMES ●
Photo: Maskot
NEWSEC PROPERTY OUTLOOK • SPRING 2021
PROPERTY IN UNCERTAIN TIMES Klas Eklund, Senior Economist, Mannheimer Swartling
We live in strange and turbulent times. In 2020, the economies of all Nordic countries contracted. Still, their property markets showed strong resilience – both prices and transaction volumes. The main reason was strongly expansionary policies in all countries. Asset markets – both stocks and real estate – are supported by monetary policy, in particular negative real interest rates. Thus, an analysis of future developments must factor in actions from central banks to a larger extent than usual. The basic forecast is continued strength of the property markets in 2021 and 2022 – but with downside risks in the longer run. Wild swings The economic development in Europe showed strong gyrations in 2020, as the pandemic spread and lockdowns followed. There was a sharp contraction in Q2, a bounce-back in Q3, and then a second slowdown in Q4, leading to a new, but milder contraction in Q1 of 2021. The pattern, consequently, has been similar to a W, with the second downturn less severe than the first.
Differences between sectors and countries have been large. Manufacturing has fared better than services. A number of countries like the UK, Spain and Italy on the one hand contracted by some 10 per cent in 2020. On the other hand, the Nordics did better, with GDP shrinking by 2–4 per cent. Bad numbers, but not as abysmal as was feared in the spring of 2020. Strong support from fiscal and monetary policy gave relief. By year-end,
nominal key rates were negative in both Finland and Denmark, and zero in Norway and Sweden. Thus, real rates were negative in all countries. Central banks also pursued QE, quantitative easing, meaning they bought large amounts of bonds to press down market yields. 10-year real government bond yields are negative in all countries. In all four Nordic nations, fiscal policy also turned expansionary last year, with budget deficits rising.
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