Norway wealth fund invests in UK properties

Norway wealth fund invests in UK properties

01 Mar 2019

Norway wealth fund 

Norway’s wealth fund, with resources greater than $1 trillion of Norway’s oil and gas, announced to increase its stakes in the UK real estate, with the view of 30 years growth plan. The fund is one of the biggest in the world and will be making a purchase in nearly 200 UK properties. Earlier it had funded the US and Japan real estate projects and other assets. Foreign financing has increased in the student accommodation sector as well, where buyers from Qatar and Singapore paid for some of the key Plymouth student apartments. Some of this property is highly attractive now, as they are offered at a 20 percent discount, as compared to a few years back. Qatar invested £3billion in the UK markets and is expected to spend £2billion more in the coming months. Some of the highest average returns have been reported in Plymouth (7.24 percent), Leeds (6.57 percent), Liverpool (6.23 percent) and Sheffield (6.24 percent), as per Yieldit’s data.

The significance of overseas ventures in the UK

There are many countries investing in official and residential opportunities in the UK, identical to Malaysia, South Africa, Israel, China, and Spain. Recently, in a speech in Parliament, Mr. Alex Brazier of the Bank of England said: “the economy has become reliant on commercial real estate sector, where 60 percent of the overseas capital inflow came into the commercial sector and leveraged loans." The sector is still getting a significant percentage of such investments, and it is necessary for the government to support it, as the country has one of the highest current accounts deficits that require such investments to sustain the sector. 

Commercial and industrial properties 

The retail sector is highly vulnerable to Brexit, and there are many reports of weakness in the sector. The FCA is taking interest in it because last time when outflows were reported the investors could not get their capital out for a short duration. The RICS and Ulster Bank Commercial market survey of Northern Ireland shows the demand for commercial property increased in the last quarter of the year and the office sector gained significantly in the last three years with growing industrial demands. 

CBRE’s Prime Rent and Yield Monitor show the rentals in the commercial market increased 0.1 percent in Q4, 2018, and this is one of the lowest quarterly growths since Q3, 2012. The performance by the industrial sector helped in increasing prime rents 1.7 percent in the Q4, where overall the rental growth in 2018, was 8 percent. In terms of industrial sector London, Eastern markets and South East, performed strongly, where the growth was 2.2%, 2.3%, and 2.1%. 

Savills industrial asset reports show 17.2 percent returns in the last 12 months, where deal volumes in the commercial sector declined 5.7 percent y-o-y in 2018, to £62.1 billion. In UK alternative and mixed-use properties, accounted for 29 percent of the last year purchases. There are uncertainties in the economy and the real estate markets but there are some regions active like the Northern Ireland where the total investment in property made in 2018 was £177m, nevertheless, it is less than the five year average of £330 million.

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