Sweden’s real estate woes force homebuilder JM to cut prices
SHARES of Swedish construction companies fell after one of the biggest names in the sector was forced to cut prices to offload homes in the third quarter.
Builder JM pointed to challenging market conditions as operating profit in the three-month period dropped 63 per cent to 146 million kronor (S$17.9 million), significantly less than analyst estimates of 262 million kronor. The number of sold residential units fell to 286 from 470 a year ago.
“To avoid capital tie-up in completed residential units, prices have been adjusted for certain units to the current market situation,” chief executive officer Johan Skoglund said in the report, adding that the cost pressure remains high, putting pressure on margins.
Sweden’s construction market has been severely hit by rising rates and higher input costs, which in turn is weighing down the country’s economic growth. On Wednesday (Oct 25), industry group Byggforetagen said the sector is set to loose 16,400 jobs between 2022 and 2024, or 5 per cent of the workforce, owing to a sharp drop in investments.
Peers Skanska, NCC and Peab all dropped about 5 per cent in early trading in Stockholm. Elsewhere, construction service provider Besqab fell by a similar amount after reporting a net loss and saying it had started no new projects in the quarter. Developer Magnolia Bostad cited a “total slowdown in the housing market with a strong impact on the number of housing starts for 2023” in its report, published on Wednesday.
Nor does a turnaround look imminent. Byggforetagen expects investments in the sector to fall by 14 per cent this year and next, which would represent a drop on par with what was seen in the financial crisis. Scaling back ambitions is a trend that’s already starting to play out for builders such as JM.
“In order to maintain good liquidity, JM will continue to take action to limit the number of unsold residential units in completed production and adapt production capacity,” the CEO said. BLOOMBERG
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