Two of Sweden’s most notable property conglomerates on Tuesday disclosed colossal writedowns in their 2023 results, as the country struggles to contend with a Europe-wide property rout.
For years, property in Europe and particularly Germany and Sweden benefitted from sustained demand, driven by low interest rates. This bubble has now been unceremoniously burst thanks to a sharp rise in rates.
SBB, Sweden’s largest commercial landlord, wrote down the value of its property by more than 13 billion SEK (€1.1 billion). A combination of writedowns and liquidations have reduced the size of its asset portfolio by nearly half, from 135 billion to 73 billion SEK.
For FY 2023, the company posted a net loss of over 22 billion SEK.
Heimstaden, a large investor with a portfolio of residential portfolio spanning from Stockholm to Berlin, had to write down the value of its investment properties by 31 billion SEK, resigning the company to to a pre-tax loss of 29 billion SEK.
In trading activity, Heimstaden’s preferential shares fell more than 30% after Fitch cut its credit rating deeper into so-called “junk” territory and the company said it would defer hybrid bond interest payments.
Both companies expressed cautious optimism that the market has bottomed out.
SBB CEO Leiv Synnes said:
“We are now at the beginning of a period where conditions in the financial markets are improving, and that more real estate transactions occur at reasonable long-term levels. The company has the largest negative asset value developments behind it.”
Christian Fladeland, Deputy CEO of Heimstaden, echoed this sentiment:
“I am moderately optimistic about 2024. We are down 15-20% from peak in Germany and Sweden. I find it very difficult to see significant potential for further falls.”
However, Fladeland added that “Sweden is more at risk of falling a bit further (as compared to Germany).”