Valuation method
Valuation of the property holdings is carried out by assessing the fair value of each individual property. The assessment took place in the form of a valuation according to a variation of the location price method, known as the net capitalisation method. The method involves setting the market yield requirements in relation to the net operating income of the properties. In the case of other project properties and undeveloped land, the value is determined based on weighing up the location price method and a development calculation where the net capitalisation method is used for a completed property with a deduction for construction costs, a profit for the developer that is in line with the market, as well as financial expenses and rental vacancy costs during the construction period.
Valuation policy
The valuation process is governed by guidelines decided by Group Management.
Valuation process
Investment properties are valued internally at each quarter-end. To ensure quality, independent external valuations from valuation firms are obtained at least once a year.
Valuation method
The internal valuation of the property portfolio is performed using a variant of the sales comparison method called the net capitalisation method, unchanged from previous years. Each property is valued individually without considering any portfolio effect. The method involves relating the market yield requirement to the property’s net operating income. For other project properties and undeveloped land, the value is assessed using a combination of the sales comparison method and a development calculation, where the net capitalisation method is applied to a completed property with deductions for construction costs, a market-based developer’s profit, and rental vacancy during the construction period.
Basic for property valuation
The property valuation is based on observable and unobservable inputs. Observable inputs include current rents, actual operating and maintenance costs, planned and ongoing investments, and current vacancy rates. Unobservable inputs include yield requirements and expectations regarding future rent and vacancy levels.
The assessment of yield requirements is based on information about market yields in transactions of comparable properties in similar locations. If few or no transactions have occurred in the property’s submarket, transactions in adjacent areas are analysed. Deals that did not close or other influencing factors also provide guidance on market yield requirements. Consideration is also given to property type, technical standard, building structure, and major investment needs. The yield requirements used in the valuation vary between regions and submarkets. The information is verified with valuation and advisory firms. The assessment is that there is an active market based on completed transactions and ongoing transaction processes; therefore, the valuation model is considered applicable.
Hufvudstaden’s average yield requirement has ranged from 3.5 per cent to 4.2 per cent over the past five years and was 4.1 per cent as of December 31, 2025. For properties with site leasehold rights, the calculation is based on a yield requirement that is 0.20 per centage points higher. Net operating income is based on market rents. Rents are adjusted to market levels by considering newly signed and renegotiated leases and expected rent trends.
Income has been reduced for an estimated long-term rental vacancy rate. The vacancy rate is based on the actual outcome of the property portfolio over an economic cycle and the expected leasing situation for the individual property. In the valuation, the average vacancy rate was estimated at 4 per cent. The actual average vacancy rate excluding projects has ranged between 1 and 7 per cent over the past ten years and was 5 per cent as of December 31, 2025.
Deductions have been made for standard operating and maintenance costs excluding re-invoiced costs and part of property administration. These are based on actual outcomes and adjusted for non-recurring deviations. The average cost per square meter over the past five years has been in the range of SEK 575–675, and the estimated cost in the valuation as of December 31, 2025, was at a corresponding level.
Construction costs are based on standard data and information reported in current site leasehold cases, adjusted for assumed cost trends. A deduction is also made for a market-based developer’s profit and rental vacancy during the construction period.
The Group continuously monitors for other indications of changes in the fair value of properties. These may include major leases, terminations, and significant changes in yield requirements. At the valuation dated December 31, 2025, the following information was used.
| Range (weighted average) | |
| Net operating income (SEK/sq m) | 2,920 - 9,220 (5,460) |
| Vacancy rate (%) | 2 - 5 (4) |
| Yield requirement, Stockholm (%) | 3.7 - 4.2 (4.0) |
| Yield requirement, Gothenburg (%) | 4.7 - 5.0 (4.9) |
| Yield requirement, total (%) | 4.1 |
Sensitivity analysis
The value of a property can only be determined with certainty when the consideration has been received after a sale. Property valuation is an estimate of the property’s market value and is based on calculations according to established principles together with a number of assumptions and judgments. To reflect the uncertainty in these assumptions, a valuation range of approximately +/- 5 per cent is normally stated. The range may vary depending on market conditions and property-specific changes. In a less liquid market, uncertainty may be greater. Hufvudstaden’s property portfolio is valued at SEK 48.1 billion, and with an uncertainty range of +/- 5 per cent, the estimated fair value varies by +/- SEK 2.4 billion. The table below shows the key factors affecting the valuation and the resulting impact on profit before tax.
Sensitivity analysis, property valuation
Fair value is an estimate of the probable sales price on the market at the time of valuation. However, the price can only be set when a transaction has been completed. In the case of an external property valuation, a range is often given to indicate the degree of uncertainty surrounding the estimates of fair value. The value range is usually +/–5 per cent but can vary depending, among other things, on the market situation, the technical standard of the property, and investment requirements. Hufvudstaden’s property holdings are recognised at SEK 47.1 billion and with a degree of uncertainty of +/–5 per cent, it would mean that the assessed fair value varies by SEK +/–2.4 billion. The significant factors affecting the valuation and the resulting impact on earnings are set out below.
| Change +/- | Impact on value before tax +/- | |||
| Rent revenue | SEK 100 per sq m | SEK 980 SEK m | ||
| Property costs | SEK 50 per sq m | SEK 490 SEK m | ||
| Rental vacancy level | 1.0 procentage point | SEK 660 SEK m | ||
| Yield requirement | 0.25 procentage point | SEK 2,990 SEK m | ||
External valuation
To ensure quality, independent external valuations from valuation firms are obtained at least once a year. The external valuations normally cover 30–40 per cent of the internally assessed market value of the property portfolio.
During the year, external valuations were obtained from three independent valuation firms: Cushman & Wakefield, Forum Fastighetsekonomi, and Newsec Advisory. The external valuations as of December 31, 2025, cover 9 properties and correspond to 39 per cent of the internally assessed market value. The corresponding share at mid-year was 33 per cent. The selection of properties was based on representing different property categories, locations, and technical and building standards.
The external valuation firms reported a market value of SEK 19.8 billion. Hufvudstaden’s internal valuation of the same properties amounts to SEK 19.0 billion. The internal valuations thus correspond well with the external valuations.
