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Sweden – Economic Background

sweeden_smSweden’s achievements today are very much the result of dealing with past difficulties. After the golden era of the 1950s and 1960s, the economy stagnated in the 1970s and was burdened by large imbalances in the 1980s. A financial crisis and subsequent recession in the first half of the 1990s precipitated a number of institutional changes. A major step forward was the introduction of a framework for budgetary prudence, with a declared goal to maintain a surplus in the public finances over time. Together with new-found independence of the central bank, this laid the foundation for Sweden’s convincing macroeconomic performance.

Since the mid-1990’s, Swedish fiscal and monetary policies have succeeded in maintaining a macroeconomic environment conducive to solid and sustainable growth. The Central Bank’s independence has been strengthened and strict government spending limits have been imposed under parliamentary control. Sweden was one of the few countries in Europe to maintain positive GDP growth throughout the recent economic downturn.

The Swedish population is forecast to grow from the present 9.5 million to 10.55 million in 2050.

Specific Investment Opportunities

Assetbase invest in existing buildings and current tenants. Our figures are based on actual numbers and not on projections. We know what the buildings are worth, how much income they are delivering and what returns they are likely to provide over a given period. Before buying any property, as part of our due diligence, we instruct/examine the following:

  • A professional structural survey
  • The level of expenditure on repairs in the previous years
  • The level of capital expenditure/refurbishment in the previous years
  • The historic level of vacancies within the property and how long it took to replace tenants
  • Current rents for the property compared to current market rents in the area
  • Tenants payment history

When we have all the above information, we can then draft an annual cash flow analysis over the projected investment term. This will include allowances for vacancies, repairs, capital expenditure, interest rate adjustments etc. We can then ascertain how the property will perform under certain future conditions.

It is best not to depend on capital appreciation alone when looking for a return from investment property. From Assetbase’s point of view, an investment property must be cash flow positive, that is, the rental income of the property must be able to cover all costs associated with ownership of said property. This in itself will create a return on investment. Capital appreciation as a result of inflationary rental increases over time is a welcome bonus.