Swedish data on housing starts suggests slight recovery

THE number of new Swedish homes being built may have recovered somewhat from the lowest level in more than a decade, according to the latest data on housing construction.

A housing-start indicator from Byggfakta published on Wednesday (Dec 20) rose by 3.5 per cent, marking the fourth straight month of positive signals from the data provider, which collates information from its database of construction projects. The indicator still remains near the lowest level since mid-2014.

Swedish housing prices have dropped since borrowing costs started rising last year, and many planned residential developments have become unfeasible as demand falls and construction costs rise. Data published on Tuesday by state-owned lender SBAB showed that the number of new housing units sold remains at about a quarter of the levels recorded in 2020 to 2021, and that the average selling time has doubled since then.

Byggfakta’s indicator signals an annual pace of about 20,000 housing starts, which is less than a third of what Sweden’s National Board of Housing estimates is needed to avoid exacerbating the country’s current shortage of dwellings. While data suggests that construction has picked up somewhat since a low this summer, the gauge sends “somewhat ambiguous” signals, according to Tor Borg, head of analysis at Byggfakta.

“Outcomes from previous months have continued to be revised lower due to new information on downsized, postponed and cancelled projects,” Borg said. “There is an obvious risk that there will be more revisions.”

Meanwhile, Heimstaden Bostad AB, one of the biggest residential landlords in Europe, has a one-in-three chance of seeing its credit rating downgraded to junk by Standard & Poor’s, a move that would exacerbate its already stretched financing situation.

The privately-owned property group was cut one notch to BBB- with a negative outlook, S&P said in a statement. The rating company cited “significant” refinancing needs totaling about 30 billion Swedish kronor (S$3.3 billion) between the fourth quarter of next year and third quarter of 2025. There were also concerns about the level of earnings in relation to the interest due on its debt.

Heimstaden Bostad has increasingly found itself at the centre of Sweden’s property crunch as it grapples with about US$10.7 billion of bond debt, much of which was taken on in the cheap money era amid a period of rapid expansion. 

To plug the financing gap, the company has embarked on a programme to sell its homes to private tenants, with plans to offload 20 billion kronor worth of apartments by end the of 2025. The Swedish real estate group currently owns about 160,000 homes in nine European countries. 

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Heimstaden Bostad deputy chief executive officer Christian Fladeland said the company has offloaded 265 apartments so far this year for 884 million kronor at 34 per cent above book value. That’s well ahead of the 500 million kronor that the company expected to have sold at year-end, according to the deputy CEO.

S&P said it could lower the rating to high yield over the next 12 to 18 months if the landlord’s Ebitda interest coverage declined to below 1.5x, if debt to debt plus equity increased to well above 60 per cent, “or if the company cannot maintain adequate liquidity as per our criteria”.