Norway's sovereign wealth fund uncertain about UK property prices

19 Aug 2016 | By Shiladitya

Norway's sovereign wealth fund (SWF), one of the Britain's biggest foreign investors, said that it was uncertain about the value of its property investments in the UK.

The uncertainty, caused by the exit of the UK from the European Union, is so great that Norway's SWF cut the value of its property holdings in the UK by 5%.

In context: World's biggest investor uncertain about UK property prices

Property portfolio in UKThe Norwegian fund's property portfolio in the UK

More than a quarter of the Norwegian sovereign wealth fund's $21 billion real estate holdings worldwide is invested in the UK.

As per 2015 figures, the fund fully or partially owned property worth $5.42 billion in the UK, mostly in central London.

While London property prices continue to increase, albeit at a slower rate, many predict a fall in the times to come.

The world's biggest investor

The Norwegian sovereign wealth fund is a fund in which Norway's surplus income from petroleum is deposited. The $880 billion fund is the world's largest sovereign fund and one of the world's largest investors.
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UK property pricesPost-Brexit property prices in the UK

The UK's exit from the European Union in June 2016 had a noticeable impact on property prices in the UK.

In July, UK saw the biggest fall in real estate values since March 2009, with property prices falling by 3%.

Losses were even greater in central London where the value of office buildings dipped by 3.8%.

Effect on the fundThe effect of UK property prices on the fund

The post-Brexit fall in UK property prices, coupled with the devaluation of the British pound (down by 12% against the Norwegian krone), burdened the Norwegian sovereign wealth fund's $21 billion property portfolio with a loss of 1.4% or roughly $290 million.

Although the fund, overall, grew by 1.3%, the growth rate was half of the average the fund had managed since the 1990s.

The fund's statement on UK property prices

"The UK vote to leave the EU on 23 June triggered significant movements in financial markets and considerable uncertainty. The valuation of the UK real estate portfolio is therefore subject to greater uncertainty than usual," the Norwegian sovereign fund's latest quarterly report stated.

19 Aug 2016Norway's sovereign wealth fund uncertain about UK property prices