The latest edition of the Catella Real Estate Debt Indicator – Credi – suggests that the Swedish property index remains below the 50 points level, indicating that the market is still negative.
However, Catella also notes that while the index fell a further 2.7 points to 41.2 against the previous month’s figure, there is evidence of improving financing conditions, with common stock of listed property companies trading at a premium despite market volatility over the past three months.
Martin Malhotra, project manager at Catella, said: “A relatively strong Swedish economy and expansionary monetary policy, with a historically favourable interest-rate position for the real estate sector, have not yet been able to reverse the reduced risk appetite and pessimism of lenders. However, the common stock of the listed companies has remained relatively strong during the turbulence of the past three months, and is still trading at a premium.”
“We can see a clear difference in trend between the polled banks and real estate companies. Banks firmly expect deteriorating financing conditions, unlike property companies which are somewhat optimistic about the future. It is the opinions of the banks that are driving the Credi Main index to such an obvious position of contraction. The concern is also reflected in the secondary market, with rising dividend yields on real estate companies’ preferred shares, widening credit spreads on bonds and the relatively low level of activity in the primary market.”
Arvid Lindqvist, head of Research at Catella, added: “The new year began with troubled and volatile Swedish and global equity markets. Several factors indicate that the market peaked in summer 2015 and that the global economy is slowing down in 2016. We can expect the average yield to rise going forward, which will mainly occur through widening spreads between A, B and C locations.”
Regarding interest rates in the market, Catella said that the average interest rate and fixed interest term has continued to fall for property companies listed on the Nasdaq OMX Nordic main market. Average interest rates fell from 4% to 2.7% between the second quarter of 2012 to the fourth quarter of 2015.
Click here to view the 14th edition of Credi: www.catella.se/credi