International Investors on the Swedish Real Estate Market- The importance of transparency to maintain the attractiveness

Sammanfattning: International real estate investors have shown great interest in the Swedish real estate market since the second half of the 1990s, when there were great opportunities to acquire properties for bargains and make good profit. With exception from peaks and valleys connected to business cycles the inflow of international capital has been a large part of the overall transaction volume. International investors have been present in different ways. A contributing factor for a high grade of international participators is the high level of transparency that has been a factor in Sweden. International investors have been present in various forms, through direct ownership or via funds. The main purpose of this study is to investigate when, where and why international investors have entered the Swedish real estate market. Starting at this point two further questions follows. How are foreign real estate investors defined, in terms of nationality and where the company is registered? The question about transparency and its importance to maintain the attractiveness for Sweden as a market is also treated in the study. The study is based on interviews with people from various sectors of the business, transaction data and a survey. The analysis shows that there are visible patterns in what types of international investors that have been active during different time periods and when they have chosen to exit the market. According to this analysis the use of theoretical tools can be rejected in a larger extent, were the large inflow of capital can be explained by behavioural psychology, market relations and the overall beneficial conditions in terms of liquidity, transparency and legal factors on the Swedish real estate market. It can be concluded that the Swedish real estate market compared to many other countries is liquid, transparent, offers smooth collaboration and beneficial fiscal and legal conditions. The study regarding transaction data shows a clear correlation between opportunistic investors who trod the market after financial crises. The study also notes a trend in the form of core-oriented capital flowing in to the market during stable periods. The large inflow of foreign capital recorded on the market is explained by heard behaviour where investors with inferior market timing can be linked to behavioural concepts as myopic behaviour and greater fool theory. Further the historical significance of transparency to attract foreign capital has been manifested, where the market today does not mean that the level of transparency compose a direct threat. Though there is a demand for tools related to transparency, which also is by great importance for Sweden in the long term to be able to keep on track with other leading real estate markets. It has primarily been perceived a great demand for information on rent levels and more extensive information about transactions in corporate form. A relationship between incentives and financial structure can be established, where historical transactions show that this relation could have a negative effect on the outcome. In line with this the definition of a foreign investor has been discussed, were the result means that an analysis of the buyer in line with the definition could result in a better material for a potential real estate transaction. Today a company is defined according to where the company is registered in terms of country, where this study means that by identify the origin of the underlying capital better analysis can be performed. This can also be applied to the definition of a property, to identify all risk takers, direct and indirect property owners. From a financing perspective, the report shows that it would result in a higher risk awareness and responsibility towards all stakeholders involved.