Investors' capital allocation into office and residential markets in ...

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All investment institutions are mainly contacted by the consultancy companies, which are looking for the investment sources for certain projects. Nevertheless, investment institutions make their own research to find the potential investments and get into contact with owners of real estate. Swedish Insurance Company used to take a loan from the national bank for the real estate funds, while Pension Company manages its own equity (without taking any loan). That means that the pension company is less sensitive towards, changing interest rates in the banks and financial crisis consequences. Real Estate Funds in UBS use other banks to take a loan (depending on the property, up to 70 per cent loan to equity ratio) and pension money is invested in real estate. Despite of new methods in property valuation it takes a lot of time and efforts to acquire the property as well as find a buyer/investor for it. However, real estate as an asset is considered to be the source of rather stable returns. After the credit crunch, financing of the property acquisition is the main problem both for the foreign and domestic investment institutions, including the institutions which invest their own equity while acquiring real estate in Sweden. The same situation is observed in Switzerland. International as well as domestic investors are active both in Swedish and Swiss real estate markets. During 2008, domestic investors became more active and competitive in real estate markets (office and residential) both in Sweden and Switzerland. All investment institutions were affected by the financial crisis, some less some more. However, in 2009, commercial bank UBS (Global Asset Management) plans to invest in the countries where the prices for the real estate are quite low. Moreover, Swedish insurance company makes investigations on new properties as well as development projects in real estate market mainly for its funds excluding direct investments. At the same time Pension company does not plan to acquire any real estate in Q1 2009, whereas there will probably be some acquisitions made in Q2 2009. 46
Chapter 10 Conclusions Real estate assets are traded in private markets. Private markets are the markets where assets are traded in private transactions, which are normally arranged by brokers, between individual buyers and sellers (Geltner, Miller, Clayton, Eischholtz, 2007). In these markets real estate assets are to be traded in a single transaction. Therefore, the average size of the individual transactions is large in private markets. It takes time for the seller to find a buyer; therefore, the liquidity in private markets is low compare to public markets. Transaction costs are normally high in private markets. Due to the transaction and search costs privately traded assets are traded less frequently (Geltner, Miller, Clayton, Eischholtz, 2007). Nevertheless, property is included in the portfolio of any investor as a diversifier. Investors are quite active allocating their capital in different real estate assets. Office and residential markets in Sweden and Switzerland were of a particular interest in the research. Before investing into real estate in every country one should be aware of the pros and cons of the investments and legal issues in the country. Through the latest data from internet sources and market reports as well as answers on the questionnaires from the companies, this research paper has provided the overview on current situation in residential and office markets in Sweden and Switzerland as well as investors’ activity in both countries. Both countries have stable economies and have conservative attitude towards foreign investors coming into their residential markets. In the second half (H2) of 2007 and first and second quarters (Q1, Q2) in 2008 GDP was increasing, and unemployment rate was low compared to the same period in previous years both in Sweden and Switzerland. Strong labour market in both countries during H2 2007 and H1 2008 caused a decrease in vacancy rates and increase in rents for office premises. At the same time there was an increase in supply in residential markets of both countries. In Sweden the rent regulation system is still a barrier for the investors to enter the market. Therefore, the increase in the supply was caused by low interest rates and favourable conditions while taking a bank loan to buy an apartment in Sweden. Instead of new constructions, the renovations had been made in the renting apartments making the apartments to be owner-occupied. Having similarities in the economies and population quotient, the real estate markets in both countries differ in size. Swedish market is bigger and more open for the investors than Swiss market. The amount of foreign capital invested in Sweden totals 70 per cent of all transactions. Swedish real estate market has high transparency. It takes two days to register the property in Sweden, while in Switzerland it takes sixteen days. The barrier for the investors in Swiss real estate markets is legal system which differs from canton to canton. Office markets in both countries are quite open and attractive for foreign capital. The demand for residential premises is likely not to decrease as there is a strong migration into the country. The residential market has no rent regulations, that is 47
Page 1 and 2: KTH Arkitektur och samhällsbyggnad
Page 3 and 4: The treaty between Switzerland and
Page 5 and 6: Table of Contents CHAPTER 1 .......
Page 7 and 8: 1.2 Aims and objectives The aim of
Page 9 and 10: Chapter 2 Methodology In the paper
Page 11 and 12: expectations rise, making the price
Page 13 and 14: single assets or in a multi/mixed a
Page 15 and 16: In 2007 the transaction volume in t
Page 17 and 18: concluded that the continuation of
Page 19 and 20: Chapter 5 An overview on the proper
Page 21 and 22: Table 5.1.2 Development in Gothenbu
Page 23 and 24: (Global Property Guide, August 2008
Page 25 and 26: in the heart of Geneva CBD area is
Page 27 and 28: However, there has been an increase
Page 29 and 30: for the foreign investors in proper
Page 31 and 32: Chapter 8 Investments in office and
Page 33 and 34: The fall in the prices of Swiss Rea
Page 35 and 36: Total return from the investments i
Page 37 and 38: Credit Suisse The company provides
Page 39 and 40: Fixed income trading revenues were
Page 41 and 42: (Source: FOLKSAM Life Administratio
Page 43 and 44: Foncipars fund invests in residenti
Page 45: - Separate Accounts: France, Italy,
Page 49 and 50: References AMF Pension (2008) http:
Page 51 and 52: Swiss info http://www.swissinfo.org
Page 53 and 54: Real estate in relation to other in
Page 55: Blackstone, office property “Euro

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