Investors have of course been comforted by an economy that has successfully navigated its way through the downturn and returned to growth significantly quicker than its European peers. With low public debt (38% debt/gross domestic product) and a stable unemployment rate (7.3%), the relative strength of the economy has provided a helpful tailwind for the sector. Combined with a healthy Swedish banking system that has shown a strong appetite to lend, the listed property companies have been leading the way in responding to the ongoing macro challenges posed by the eurozone.
Listed Swedish real-estate has returned 18.8% (in €) per annum over the last five years, outperforming both listed European real estate (5.2%) and European equities (5.9%). More recently, the latest data from IPD shows that Sweden was the only European country to report rising capital values in 2012, with most other markets suffering from ongoing valuation write-downs.
Impressive investment returns have stemmed from healthy fundamentals in the direct market that have allowed the listed companies to consistently grow their rent-rolls. New build activity has remained low and the listed sector’s average occupancy rate has cleared the 90% level for five straight years. This continues to provide a supportive backdrop for further earnings growth.
At a company level, shares are trading below underlying asset values, with multiples comfortably below historical averages. Balance sheets are strong and as a result, the sector offers an average dividend yield of 3.5%. This looks particularly attractive given the listed space is rife with quality management teams that have a strong track record of delivering impressive income growth.
Guy Barnard, manager of the Henderson Horizon Global Property Equities Fund and the Henderson Horizon Pan European Property Equities Fund
These are fund manager views at the time of writing and may differ from those of other Henderson fund managers. The information should not be construed as investment advice. Before entering into an investment agreement please consult a professional investment adviser.
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