After two years of high inflation, reduced interest coverage and tougher financing environment, conditions are now improving for Swedish real estate managers, according to a report published by Nordic Credit Rating today. An overall minor weakening of companies’ business risk profiles, better access to capital, and lower market interest rates have stabilised credit quality. However, the sector is more sensitive to potential negative shifts in business and financing conditions than it was before 2022, resulting in higher overall credit risk.
"Due to ample access to capital and cheaper financing, we believe real estate companies will shift focus from managing financial risk to operations and growth in 2025" said NCR credit analyst Gustav Nilsson. "Transaction volumes and project development are poised to increase in 2025, which could influence credit risk positively or negatively, depending on the impact on companies' business and financial risk profiles."
Operational challenges in cyclical segments will likely persist through 2025, with improvements expected by year-end. We expect a continued decline in net letting, a slowdown in rental growth, and increased vacancies in the coming quarters. We anticipate, however, that rental growth in the residential real estate sector will be strong, with average rents rising by about 5% in 2025. Residential rental adjustments did not increase with inflation in 2023 and 2024. We believe this segment will catch up in the next couple of years.
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Yun Zhou, analyst, +46732324378, yun.zhou@nordiccreditrating.com