HSBC has downgraded 11 UK real estate stocks to “hold” or “sell” ratings. The bank cited falling asset prices and looming refinancing risks. As a result, there are no UK property stocks left with a “buy” rating from HSBC.
According to HSBC analyst Stuart Blair, the UK real estate sector is currently “precarious” with stretched valuations. He expressed concerns about several headwinds faced by the sector, including rising interest rates, inflation, and the ongoing war in Ukraine.
Blair highlighted the potential difficulties for property companies that have heavily borrowed to finance their investments. Falling asset prices could exacerbate these challenges. Additionally, some companies may struggle with refinancing as their debt becomes due.
The UK real estate sector is currently undergoing its toughest test in years. While there has been strong demand for rental properties in recent years, this demand is now starting to cool. Rising interest rates have also made borrowing money more expensive, impacting the overall demand for property.
HSBC’s downgrades signify the challenging environment that the UK real estate sector is facing. As interest rates continue to rise and the economic outlook remains uncertain, the sector is expected to experience ongoing pressure in the coming months.
