The latest Credi index reading published by Nordic headquartered financial group Catella suggests that tougher financing has hit the Swedish property market.
Credi – the Catella Real Estate Debt Indicator – saw its December Main index fall by 12.7 points to 43.9. As the index is based on the approach to the market of both lender banks and property owners, it points to weakened access to bank financing.
In particular, the data suggests the Current situation sub-index dragged down the Main index, as it declined 20.9 points to 42.3. The forward looking Expectations sub-index also fell below the 50 points level, suggesting a negative tipping point.
Martin Malhotra, project manager at Catella said: “We see two main factors driving the cooling of the financing climate. Firstly, reduced appetite from investors in the capital market and, secondly, seasonal effects with the banks having lent large amounts to the property sector during the year and the weighting of the sector therefore becoming high.”
At the macroeconomic level, Catella’s findings about tougher lending in the property sector contrasts slightly with the latest views from Sweden’s central bank, which said on 15 December that it would hold its repo rate unchanged at a negative -0.35%, and signalled that the local economy was performing relatively well.
However, Arvid Lindqvist, head of Research at Catella added: “Since the summer, investor risk willingness has also decreased. This is mainly due to concerns about a weakening global economy and expectations that the Fed will be raising interest rates. Looking at the fourth quarter and the trend in Sweden, this is in line with the changes that have taken place globally in the financial markets since the summer.”
Reduced levels of securitisation may contribute to making it more difficult to access bank financing for the property sector. Investors in property have also been facing a declining yield, Catella’s figures suggest: for relevant companies listed on the Nasdaq OMX Nordic Main Market, “since 2009, the implicit yield has fallen from approximately 6% to the current level of approximately 4.5%.”
The 13th edition of the Catella Real Estate Debt Indicator can be downloaded from www.catella.se/credi