The business review mentioned, among other things, that net rental yields were affected by a higher amount of financial charges. Personally, I would assume that housing companies undergo renovations from time to time, and these result in financial charges.
If those figures are correct (I can’t be bothered to check specifically), wouldn’t that leave more yield: 4.96% - 2.25% - 0.5% = 2.21%?
The share price is, of course, lower than the book values, so the calculated yields on market values are slightly better.
I also believe that maintenance charges will continue to see some sort of annual increase in the coming years, although no massive hikes are expected as inflation slows down.
Regarding rents and apartment prices, I am a bit more optimistic over a 5-year horizon. There is oversupply now, but construction is actually quite moderate already, and new supply is no longer coming in such volumes. The rental market has taken a hit from subsidy changes, and this may continue to have a negative impact for a while, especially on newer small apartments. Looking at building permits, the average square footage has risen significantly, meaning fewer small apartments are being built. This is good for the rental market of small apartments, which will inevitably start to balance out in growth cities.
Wage levels and rents/apartment prices won’t move in different directions forever; in the long run, they are interconnected. Lately, they have diverged quite rapidly. I don’t see a high probability for the current trend to continue when looking at a 5-year timeframe. Will wages drop? Hardly, so the alternative is rising rents, which also pull apartment prices up. Economic development and employment also play a big role in this equation. General sentiment regarding economic and housing market development seems quite negative, so there is potential for a positive surprise.
Asuntosalkku’s Tallinn portfolio is well-suited for retail sales: high-quality apartments in prime locations and an active market. Although it’s quite small-scale, it is still value-creating activity. The Finnish residential portfolio is more “investor grade” because it consists mainly of small apartments. I find it very unlikely that anyone would buy Asuntosalkku’s Finnish portfolio in its entirety, at least not at a price that would make sense for Asuntosalkku to sell. Administratively, it would be extremely laborious. Large investors naturally prefer whole buildings.
So, I don’t see it as a good scenario for Asuntosalkku to be forced to sell the Finnish portfolio quickly. Fortunately, there is no sign of the company being driven into such a tight spot. In that situation, I believe significant capital losses would be realized if large quantities had to be sold. There are certainly apartments in the portfolio that could sell for a good price, but why indeed go to the sell side if there’s no rush on the buy side.