Historically low valuations in Swedish real estate sector

Nordic bank Handelsbanken reports that the Swedish real estate sector is currently experiencing a historically low valuation. 

Stockholm

This is largely due to a 23% drop in the real estate index since October 2024, while the bank's sector forecasts have remained consistent.
In an analysis, Handelsbanken expressed a positive view of the sector and identified favorites within the office, industrial/warehouse, and residential segments. 
Despite stabilized interest rates, steady property values, consistent dividend yields, and anticipated earnings growth from 2025–2027, valuations in the real estate sector remain depressed. The bank notes that the impact of interest rate hikes in late 2024 and early 2025 has not fully dissipated, even with subsequent lower market rates and credit spreads. Estimates for earnings per share and net asset values have barely changed since October 2024, yet share prices have fallen by approximately 20%, making current valuations significantly more attractive than a year ago.
Assuming interest rates have peaked and property direct yields remain stable, Handelsbanken forecasts that the sector's earnings per share will grow by an average of 9.2% annually from 2024–2027 (with offices at 7%, industry at 13%, and residential at 9%).
The bank believes that the focus should shift from speculating on falling interest rates to recognizing that current stable rates are supportive. They also anticipate that expected GDP growth will eventually bolster the leasing of commercial properties. The bank suggests that increased transaction volumes could help support property valuations and differentiate between high and low-quality assets.
Handelsbanken's top choices include Platzer for offices, Catena for industrial and warehouses, and Trianon for residential properties.
The bank believes that Platzer’s current share valuation is overly pessimistic, not reflecting expected profit growth, prime Gothenburg office locations, and top-tier logistics properties.
Catena's share price has dropped 24% over the past year, while its profit forecast has risen by about 10%, indicating an attractive entry level with limited risk of lowered forecasts. Handelsbanken also positively notes the recent acquisition in Jönköping and the CEO's strong statements regarding future acquisitions in the Q2 report.
In the housing segment, Trianon is favoured due to anticipated strong demand in the Malmö region. The bank forecasts that Trianon can achieve double-digit profit growth in the coming years, driven by rent increases and lower financing costs.