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Look to Sweden for strong property returns, says IFA firm


Investors looking for strong returns from property should look outside the recession-hit UK and focus on the opportunities in property available in Sweden, according to IFA firm Perspec

Investors looking for strong returns from property should look outside the recession-hit UK and focus on the opportunities in property available in Sweden, according to IFA firm Perspective Financial Management.

The firm is offering investors access to a new regulated property investment fund, EPH Sverige. It believes the Jersey-listed fund provides a stable asset-backed investment opportunity which will deliver steady income.

With a minimum investment level of GBP10,000, UK investors can tap into the property opportunities that currently exist in the Swedish market with the fund targeting good quality, well-located, pre-let residential properties. The fund is also suitable for both Sipp and Ssas investment.

Typically, the portfolios will offer net yields ranging from five per cent to eight per cent and be comprised of between 20 and 200 residential units. They may also contain elements of commercial property.

The anticipated term for EPH Sverige is five to seven years with a maximum life span of ten years. Based on an aggregate subscription amount of GBP25m, EPH Sverige will seek to deliver a geared net internal rate of return of not less than 12 per cent over a five-year period and not less than 14 per cent over seven years.

Tim Langman at Perspective Financial Management says: ‘The UK property market may not be providing much for investors to get excited about at the moment however there are other opportunities available within the rest of the European Union which offer rather more in terms of anticipated returns. EPH Sverige is one fund which will invest in the property of a country which has a strong and diverse economy and, most importantly, 60 per cent of its population living in rented or co-operatively owned accommodation.

‘Rental demand in the fund’s target areas, the commuter towns surrounding Stockholm and Gothenburg, regularly exceeds supply, which means strong year-round rental yields. There will also be a positive yield gap between the rental yield itself and the cost of the borrowing which will be used to fund the purchases. Importantly EPH Sverige is also a regulated investment opportunity, unlike a number of speculative and off-plan investments which seem to have been popular in recent years. This should provide investors with added peace of mind and security.’

EPH Partners, the property advisers to EPH Sverige, believe the strength of Swedish financial institutions, combined with sound investment fundamentals in the property market, means Sweden is one of the few countries to offer investors a safe port in the current storm.  Sweden was ranked as Europe’s fourth largest real estate investment market in 2007 with more than SEK140bn (GBP11bn) in total real estate transactions.

Paul Hogarth, co-founder of EPH Partners, says: ‘The fundamentals of the Swedish property market should provide an attractive rate of return for investors. Capital values in South West Sweden are low, often less than the price of the land and build cost which restricts residential development in South West Sweden meaning there is no over-supply of property. Also, as a result of State-controlled rent reviews, inflation-linked rental growth is guaranteed. Given the current turmoil and volatility of equities at present, the dire state of the UK property market and the general lack of exciting opportunities for investors, EPH Sverige offers a particularly attractive investment and risk:reward ratio.’

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