Catella sees Brexit boost to Swedish property sector

The latest monthly Catella Real Estate Debt Indicator (Credi) survey figures suggest that the Swedish property sector benefitted from the Brexit vote, which actually had a positive impact on financing for property companies, according to Catella’s property experts.

The data suggests that property companies’ loan to value (LTV) ratio rose as the everage interest rate fell. Listed property companies have outperformed the broader stock market, Catella said.

The average LTV of property companies listed on the NasdaqOMX Nordic Main Market increased to 54.7%. The average interest rate stands at 2.6%. However, the Credi survey also suggests that both property companies and banks believe that the property debt financing market is contracting currently.

Martin Malhotra, project manager at Catella, added: “Increased risk tolerance and a search for returns have resulted in a newfound interest in corporate bonds and the launch of new types of securities. Overall, the stock market does not appear to have been affected by the Brexit vote, and the property sector has benefited from continued low market interest rates.”

“The most significant change in the latest survey is that credit margins have stabilized, as opposed to the June survey where a large share of respondents reported increased credit margins. This stabilisation has almost single handedly improved the Credi Main index, and we are headed towards a more stabilized property debt financing market overall.”

Arvid Lindqvist, head of Research at Catella, said: “We are seeing a development where the expectations of additional central bank stimulus in Europe and Japan is boosting the equity markets, but we are about to reach an inflection point. Historically, property yields have been pushed down by high GDP growth and a lowered repo rate. As GDP growth is declining and the repo rate has bottomed out, we expect to see higher property yields in secondary locations and smaller cities.”

 

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