MR 2018

45

Copenhagen Property Market Report 2018

Prime yields have stabilised

6%

5%

4%

3%

+325 bps

2%

1%

0%

08 09 10 11

12 13 14 15 16 17 E18

Residential properties 10-year Danish government bond yield

Sources: Danmarks Nationalbank and Sadolin & Albæk

in the capital gain potential. In the next 12 months, we therefore expect the highest-and- best use valuations of several residential properties to change scope from a buy-and- hold to break-up scenario.

Hulgaards Have, Copenhagen NV

Intensified competition for core assets In 2017, the investment market was characterised by one overriding phenomenon: The competition for core assets intensified as foreign market players dominated the segment, driving domestic market players further out the risk curve. Active in most segments of the property market, the new international players make direct investments, e.g. via property companies and funds, or together with investment managers, a strategy used mostly by institutionals. In 2017, the most active foreign investors in terms of estimated total acquisition volumes were Heimstaden (DKK 10.1bn), Blackstone (DKK 3.2bn) and Akelius (DKK 1.3bn). Heimstaden is a good example of the strong investment appetite displayed by foreign investors: Heimstaden has made acquisitions in a number of different segments, ranging from the high-end residential turnkey development of Scherfigs Have (DKK 680m), situated in the affluent Østerbro district, the old-stock cooperative housing society of Hostrups Have (DKK 1.7bn) in central Copenhagen, to a portfolio of terraced housing, etc. across Denmark, the Marigold Portfolio (DKK 2.9bn). In total, foreign investors accounted for 70% of the total residential acquisition volume, up from 51% in 2016. International investors dominate Most of these new international investors operate in multiple markets and across borders, with moderate home country bias, allowing them to zoom in on markets that offer the most favourable risk-adjusted returns. They tend to have a strong preference for high-volume transactions and a higher willingness to pay portfolio premiums. For the same reason, they are very active in the market for turnkey projects because they allow them to achieve a sufficient volume of relatively low-complexity assets. Foreign investors especially covet the low interest rates and favourable mortgage system in Denmark,

Schades Have, Copenhagen S