Property companies enter new territory as policy turns dovish, says Catella

The Main index has increased from 50.8 to 56.3 in the October issue of Catella’s CREDI indicating a substantially improved credit market. Property companies maintain an even stronger view of the credit market while banks improve their view of the future.

“This year’s third CREDI survey reflects a substantially improved credit market with improved access to credit, reduced credit margins and extended credit durations,” says Martin Malhotra, Partner at Catella. “The CREDI Main index is increased due to an uncommonly high perception of the current situation among property companies and a somewhat enhanced outlook in the banks future expectations. Pivotal post-quarter developments within monetary policy have not yet been materialised in the half-year reports but can be expected to have great influence going forward.”
Arvid Lindqvist, Head of Research at Catella, adds: “During the previous half year the number of transactions on the property market has declined while the average transaction volume per deal has increased. This is usually an indication of a forthcoming repricing on the market. Consensus among investors is now that the low interest rates will remain for a long period of time, which makes property investments attractive when compared to other asset classes.”
Malhotra says: “The dovish turn in monetary policy has been reflected in property companies’ preference shares, where the average dividend has fallen to 5.8 per cent. Due to the post-quarter price surge, common shares of property-related companies now appears to be trading at a record-high premium. Also, as the volume of outstanding bonds increases slightly, the bond market’s share of the listed property companies’ debt is now at 29 per cent.”