NAI Svefa's property index: University cities are the hottest in Property Sweden

NAI Svefa's annual report "Swedish Property Market", where 24 of Sweden's cities are graded from an investment perspective, shows that the university cities are gaining ground. Traditionally large cities like Malmö and Göteborg have come out well, but now upcoming university cities like Uppsala, Lund and Linköping are pulling away. The dominance of the large cities is no longer to be taken for granted.
In the report "Swedish Property Market – Focus on 24 locations", NAI Svefa has analysed the property market from an investment perspective. Each location has been given its own grading based on a ranking system for the location's property market. The ranking system consists of ten different parameters, including population growth, unemployment rate, and investment data, and these are assessed on a scale of 0-10, so that a maximum property index of 100 is possible. The index has been produced to give players on the Swedish property market an indicator they can base investment decisions on to ensure these are successful.
"The clear leader is Stockholm with a property index of 85, but the differences between the capital and other dynamic up and coming cities is not as great as is often thought," says Lars Haag, Head of Valuation and Analysis at NAI Svefa.
The university cities have progressed a lot over recent years, mainly due to increasing population growth and a strong underlying job market. Lund (68) and Linköping (58), for instance, have a better index than Malmö (57).
The best progress is shown by university cities that are closely linked to the local job market. After they graduate, many students elect to stay on if the local job market is favourable. Infrastructure and communications also play a large role here.
"University cities like Jönköping (49), Linköping (58) and Lund (68) benefit from their vicinity to European routes and a rail link," says Lars Haag. However, the future holds an exciting development in the form of the plans for faster rail links running south from Stockholm and the expansion in rail traffic to the north. These are major factors that will contribute to the favourable development of many local property markets in future.
There are also a few storm clouds gathering over the Swedish property market, mainly over a number of locations that have seen a dramatic expansion in shopping centres and other major retail areas. Although this expansion is evidence of optimism and buoyant purchasing power, there is a substantial danger of overcapacity, with increased tenancy risk and pressure on rents as a result.
"In locations like Norrköping (40), Kalmar (38), Luleå (36) and Växjö (37) we can see an increase in risk closely related to overcapacity in terms of major retail areas," says Lars Haag. Increases in interest rates will eventually reduce spending power and these areas will then be particularly susceptible.
Cities with the lowest property index, such as Eskilstuna (25) and Trollhättan (25), are closely associated with major employers that have left the location, resulting in high unemployment. Low population growth is also a major contributory factor to their low index. A low index indicates a greater investment risk, but in a number of the locations the price may still be attractive.
"A new start-up in the location can mean that property prices shoot up. Where municipalities sell off their housing stocks, this can also have an impact."

For further information, please contact:
Mr Lars Haag, Head of Valuation & Analysis + 46 76 788 18 96