"After more than a decade of being one of the strongest sectors in the Nordic stock market, real estate faces a significant downturn. Essentially all real estate sectors are affected negatively and valued at a discount, except logistics," says Mikael Söderlundh, Head of Research and Partner at Pangea Property Partners.

The Nordic stock market has during the year had a return of -16 percent excluding dividends with the real estate sector as a clear anchor with a negative return of -43 percent. The downturn is partly driven by higher debt cost and financing constraints, especially connected to the bond market. In addition, there is an uncertain price picture.

“In current transactions, we see that most buyers have reduced their bids by 10-20 percent, but the valuations are yet to be adjusted. This is something the investors see through when pricing listed shares, but it could become a credibility issue and make foreign investors more inclined to invest in other markets," says André Lundberg, Head of Corporate Finance and Partner at Pangea Property Partners.

The Nordic property shares are valued at a 17 percent discount to NAV in the current market, but the discount increases to 35 percent when excluding Sagax.

Country-wise, the valuation varies from a 50 percent discount in Norway to a 12 percent discount in Sweden. The property shares in Denmark and Finland are valued at a 14 and 38 percent discount respectively. As a consequence, the listed companies in the Nordics have become net sellers in the current market, from being large net buyers last year.

Logistics is the only real estate sector still valued at a premium. However, looking at share price performance in 2022, the most resilient sectors have been hotel and retail dropping -8 and -20 percent respectively.

There are currently 48 property companies listed on the Nordic main list, valued at a 17 percent discount, and another 32 property companies listed on the alternative lists, valued at a 21 percent discount. The total market cap sums up to EUR 62 billion with Sweden as the largest market accounting for 80 percent of the region’s market cap, compared to last year’s numbers of EUR 109 billion and 87 percent. Only two property companies have gone public during 2022, Emilshus and Swedish Logistics Property, compared to ten companies in 2021, according to the report.

"The market cooldown will open up interesting opportunities for long-term investors with strong balance sheets. Despite uncertain times, the Nordics continue to be an attractive investment market with strong long-term fundamentals," says Mikael Söderlundh.