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Real estate boosts the Icelandic corporate bond market

Publicerad: 6 december 2014, 00:00

The Icelandic real estate sector has benefitted from being on the corporate bond market where it has gained access to a pool of institutional investors. The corporate bond market‘s recovery in Iceland didn‘t gain momentum until 2013, when the value of newly listed bonds amounted to just over ISK 100 billion or SEK 6 billion, more than 2.5 times the value of bonds listed in the previous three years combined. Listing activity this year is on par with last year‘s. Altogether, the market value of listed corporate bonds is currently around ISK 270 billion (SEK 16 billion). Thereof 17 bond issues related to real estate financing account for ISK 103 billion (SEK 6.1 billion), or nearly 40% of the market value of all listed corporate bonds. The number and amount, respectively, rise to 29 and ISK 163 billion (SEK 9.7 billion), or 60% of the corporate bond market, if we include the Icelandic banks‘ collateralized bonds, backed by the banks‘ mortgages.

The real estate bonds are generally asset backed and without exception indexed to inflation. Real yields are commonly between 3.5% and 4.2%. The median issue size is ISK 4 billion or SEK 240 million, but there is considerable variation around the median value. The largest issue, with market value of ISK 19.5 billion (nearly SEK 1.2 billion), relates to the financing of the Harpa cultural and social center in downtown Reykjavik. Quite commonly, the issuers are alternative investment funds that finance subsidiaries of the real estate companies or individual real estate investments. Such issues amount to about ISK 50 billion (SEK 3 billion).

With robust economic growth and real estate business investment picking up pace we can expect real estate to feature quite prominently on Nasdaq Iceland‘s equity and fixed income markets in the near future.

Peter Malmqvist_blogg

Páll Hardarson
Vd för Nasdaq på Island.

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