Sweden’s financial stability faces increasing near-term threats from a heavily indebted commercial property sector, the nation’s financial watchdog said.
Commercial real estate owners in Sweden should reduce debt and strengthen their balance sheets to avoid more turbulence after cracks in the system have become apparent, the Swedish Financial Supervisory Authority said in its stability report on Monday.
Against a backdrop of sharply rising market rates, Sweden’s property firms must refinance more than US$40 billion of maturing bond debt over the next five years, sparking concern over the financial viability of many highly leveraged landlords.
Photo: Reuters
One of the nation’s biggest, Samhallsbyggnadsbolaget i Norden AB, has started a strategic review that could result in a sale of the company.
“There is a heightened risk that there will be turbulence on financial markets,” Swedish Financial Supervisory Authority Director-General Daniel Barr said. “Our assessment is that the Swedish financial system is resilient, with well-capitalized banks, but we need to follow developments and be ready to act.”
The agency has long warned about increasing risks in the commercial property sector. While those risks are large, “individual companies’ problems should not be equated with acute problems in the entire Swedish property sector,” it said in the report.
Sweden’s economic output grew more than previously estimated at the start of the year, as rising inventories and higher net exports helped offset a decline in private spending.
First-quarter GDP increased 0.6 percent from the previous three-month period, Statistics Sweden data showed. That compared with a median estimate of 0.2 percent growth in a Bloomberg survey of economists, matching the pace indicated by a flash estimate.
The increase followed a 0.5 percent contraction in the final quarter of last year and confirmed the brighter-than-expected picture for the largest Nordic economy, which has so far defied forecasts of a recession even as households and its housing market are hit by the fallout from higher prices and surging borrowing costs.
Inventory investments contributed 0.6 percentage points to GDP growth, while net exports added 0.3 percentage points, Statistics Sweden said. Household consumption fell 1.2 percent.
Forecasters still believe that economic output would shrink this year, and the European Commission projects that Sweden would undergo the worst contraction in the EU.
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