I want to start off with a few words on our market in Northern Sweden. We are experiencing a unique growth situation that started a few years ago and has really taken off the last year. Investments of this kind are remarkable and have not been seen in our market, and we are only in the beginning of the green growth revolution. Having that said, we, as the largest property owner in our cities on our market, work every day to take advantage of the opportunities we see, especially going forward. I will get back to this later in this presentation. The operational performance continues to be very strong with the all-time high occupancy ratio, good cost control, and improved energy metrics. Financing costs have, however, continued to increase due to higher market rates. For the quarter, the occupancy rate was 92%.
It's up 1 percentage point from last year. The surplus ratio was 73%, up from 71%, which shows a good and solid development. Regarding net letting figure of zero SEK for the quarter, it can be referred to our increased yield requirements on new investments, and that it takes somewhat longer to reach business conclusions with our tenants. We aim to increase the return on our investment, which will lead to reduced CapEx. Interest costs are increasing due to rising market interest rates. The Sveriges Riksbank raised another 25 basis points in September. That means they have implemented an interest rate increase from 0%-4% in just 18 months. Refinancing has been a hot topic during the year for the Nordic real estate. We have successfully managed to refinance both bonds and bank loans during the year at relatively good margins.
We find ourselves in a good position with only bank maturities coming 12 months. Interest rates have continued to affect property yields. We have adjusted the average valuation yield to 10 basis points to 6.01%, which has resulted in a negative unrealized value change corresponding to 0.6% of total portfolio value. Looking forward, on a short-time basis, we have and will take action to manage the effects of higher interest rates and yield expansion have on financial KPIs. Simultaneously, we continue to position ourselves to capitalize on the green transition led by the Swedish sustainable industries in our market. The rental market shows good resilience, which gives us a sense of comfort. We are prioritizing CapEx by higher return on investments requirements to manage the effect of higher interest rates.
Going into results in more detail by looking at the income statement, we can confirm the total income is up by 11% to SEK 621 million. Like-for-like rental growth was 10% in the quarter and is explained by mainly CPI indexation. On the cost side, we have managed to keep costs at the same level as previous year, thus a larger property portfolio. All in all, we have satisfying cost control despite the inflationary pressure. We continue to invest in our properties to be more proactive and future-proof when it comes to sustainability and energy efficiency. Our goal is to reduce our carbon footprint by 50% to 2030, to be carbon neutral by 2050 at latest.
It is satisfying to see that our day-to-day optimization gives us an increased energy efficiency by 2.9% by end of Q3. The unrealized value changes of properties amounted to SEK 206 million and comprised capitalized interest of SEK 10 million. The increased interest cost is a function of higher market rates. On the opposite side of the effect of higher market rates, unrealized changes on derivatives gives a positive effect of SEK 97 million for Q3. We run a well-diversified portfolio in terms of both segments and geography. We also have 30% of our rental income from public-related tenants and 9% from residential. This means that we have a low risk in our cash flow.
Looking at the rental growth on offices, it has had a stable trend upwards, with further potential as it is at a relatively low crown per square meter rent. For 2023, we have more of a hockey stick development with the indexation and a good development in new letting and renegotiations kicking in. The CPI indexation for 2023 was 10.9%, which corresponds to increased rent of around SEK 170 million on an annual basis. For 2024, CPI indexation will be disclosed in mid-November, and macroeconomists forecast a print around 6%. With a relatively low absolute rental levels in average, we believe that our tenants are in good position to manage upcoming adjustments.
Net letting has been positive 19 out of the last 23 quarters. The net letting for the third quarter amounted to zero and are explained by two parts. First, we have actively chosen to increase the yield requirements on our investments, which has affected a number of new investment decisions and the net letting. We do this, as stated earlier, to manage the effect of higher interest rates. Second, we see signs of our tenants' decision-making is taking longer. The current macro environment and ongoing conflict are not leaving anyone unaffected. I will now hand over to Rolf, who will go into the portfolio and our financing. Rolf?
Turn to page six. Thank you, Knut. I will begin by looking at the market value of our properties, which amounted to SEK 31.2 billion. Property valuations in the third quarter has resulted in negative value changes of SEK 204 million, corresponding to 0.6% of the property value. The average yield was 6.01%, which is 10 basis points higher since last quarter, and 60 basis points higher since the lowest level in Q2 last year. The yield expansion in the quarter is largely offset by rental growth. The inflation assumption for 2023 is still 6%, and with an average yield of 6% and an average interest rate at the end of the period of 4.8%, we still have a yield gap of 1.2, and thus a continued strong cash flow.
Year to date, we have invested SEK 1.1 billion in tenant improvements, property improvements, and new builds. We have increased yield on cost requirements, which will result in lower short-term CapEx volumes. All our ongoing major projects are proceeding according to plan, both in terms of cost and time, and before we start our projects, except residentials, we always have 100% signed leases. Most of the rental income in these major projects come from tax-financed operations. All new builds and major renovation will be certified according to BREEAM, at least level very good. We currently have around 90,000 sq m under construction, with a total investment volume of SEK 2.5 billion, where remaining investments amount to SEK 500 million.
In addition, we have another 200,000 sq m in existing or possible building rights in central locations, which we either develop ourselves or sell to other developers. We aim to create at least 30,000 sq m of new building rights per annum. We feel the demand for new modern premises and housing remains high, but prevailing market conditions means that we will be more cautious on starting large projects in the coming quarters, and we will postpone the start of our housing projects. During the quarter, we have successfully refinanced both unsecured bonds and bank debt, taking away the refinancing risk for 2023. We have also acted to secure ICR at acceptable levels by restructuring existing derivatives, as well as signing new ones.
Over the next twelve months, we have additional loan maturities, commercial papers excluded, of SEK 5.3 billion, which corresponds to 31% of interest-bearing liabilities. All upcoming maturities relate to bank loans. We have ongoing negotiations regarding all maturities during Q1 next year with a total volume of SEK 4 billion. We have high confidence in refinancing these before year-end, as banks have already provided soft commitment to rollover. We have also started discussions regarding the loan maturities during Q2 next year. Our goal is to refinance these during Q1 at latest. Our good banking relationships and available liquidity makes us feel secure in the face of future debt maturities. And we currently have 83% of our outstanding loans with banks, 3% in covered bonds, 3% in commercial papers, and the remaining 11% consists of unsecured bonds.
Our loan-to-value ratio was 54.2%, which is under our target of 55, and far below our covenant of 65%. The interest coverage ratio amounts to 2.2 x. Now, our target is that ICR should not fall below 2x . To manage the balance sheet and secure ICR above 2x , we're in several discussions to dispose assets. We will use the net proceeds to reuse debt and thus lowering our financial costs and at the same time, improve our loan-to-value and strengthen the balance sheet. As Knut said earlier, we're also limiting low-yielding CapEx to further strengthen the balance sheet. Our debt maturity amounts to 2.4 years and the fixed rate maturity to 2.6 years.
The average interest rate at the end of the period was 4.8%, which is 0.2% higher compared with last quarter. The increase is due to rising market rates and slightly higher margins. We have, as I said, 83% of our financing in banks, SEK 800 million in unused credit facilities, and a secured loan-to-value ratio of 46%. We will also add additional borrowing capacity during the year through completed projects. This, together with good relationships with our banks, makes us feel comfortable about future refinancing. As you can see in the graph, the yellow bar, we have gradually reduced our share of commercial paper over the past year in favor of bank financing.
Our ambition is still to be a recurring issuer of both green unsecured bonds and commercial papers, and today, 51% of our total debt consists of green or sustainability-linked loans. We're actively working to increase the proportion of green assets. Our long-term target is to have 100% green financing. Net debt to EBITDA improved to 10.9x compared to 11.2 in Q2, and net debt has grown in pace with EBITDA over the last years. Yet again, I feel comfortable with our current financial position and action taken. Our strong cash flow will serve operating expenses, committed CapEx, and proposed dividend. I will now leave the word back to Knut.
Thank you, Rolf. What is happening in the northern part of Sweden is a long-term growth story, as I said earlier. We have probably the fastest-growing market in the whole of Europe, thanks to all new investments in the transition towards a greener industrial production. Over EUR 100 billion will be invested in the region coming 10-20 years. This is important not only to businesses that are active in the region, but it is also important to Sweden as a country and for the CO2 net zero target. Will all those investments take place? Yes, I believe so. Because of all the fundamentals they are built upon. What, what do I mean by that? There are natural resources like minerals and forests, the access to clean green electricity through hydropower and wind power, the cold climate and available land to develop.
These fundamentals are not movable and will not go away. To take these investments into reality, we need to cooperate across public and private sectors. Today, residential new builds is challenging with current economic environment, not profitable to start new production just now. Of course, it is our greatest interest that economic growth is created. We are lobbying towards politicians and the government, and we seek cooperation with other companies to accelerate this growth. As the market-leading real estate owner in the regional cities, we are in a sweet spot to capitalize on the increasing demand for new offices and urban services. Sweden as a country need to come together and act on this opportunity. We are in the beginning of something huge regarding the green transition.
It is within offices and with our office tenants that we see the strongest development and the greatest potential for growth. In the 2023 office report from the industry organization, Fastighetsägarna, where our market is specifically addressed, the office is described as the city's engine and social hub. It also shows that the majority of employees choose to be in the office most of their working hours. The report is completely in line with our perception of our tenants, and we see no sign of them wanting to scale down. Instead, the office has become increasingly important for building corporate culture and attracting employees. We see a high demand for attractive offices in the right locations. Rather than to scale down, we experience more demand for design and flexibility between workplace and meeting possibilities.
Attractive workplaces in our cities provide increased flows of people and conditions for more tenants in other segments as well. The transaction market shows small signs of picking up in activity. During Q1-Q3 and so far in Q4, we have seen deals being announced. However, the Swedish market is down by 60% in the transaction volume compared to last year. We have taken and will take more action in a short-term perspective to manage the balance sheet and secure ICR above 2x. We are in several discussions to dispose assets, as Rolf said. We will use the proceeds to reduce debt and lowering financial costs and at the same time improve LTV and strengthen the balance sheet. The ongoing major projects are proceeding according to our initial plans, both in terms of cost and time.
We are actively lowering our CapEx by postponing some low-yielding investments because of higher interest rate costs. Regarding tenant improvements, the pace is still good, and the yield to cost remains at around 8%. We will balance our investment with our financial covenants and cash flow. By near-term management of CapEx, we are positioning ourselves to be in a better position when interest rates turns. We have, like said, stated earlier, a very positive outlook on our market. To summarize, in short, we are presenting a strong quarter on operating level. The occupancy ratio of 92% is retained, and we managed to keep the property management effective, resulting in a surplus ratio of 73%. Financing costs are up due to higher market rates.
We have acted to manage ICR by restructuring and adding new derivatives, and we are looking on additional actions to cope with even higher interest rates. We are more cautious on putting on more CapEx in the near, near term. We have successfully managed to refinance both unsecured bonds and bank debts during the quarter, taking away the refinancing risk for 2023. I am confident that with our current maturity profile and the relationship we have with both banks and investors for upcoming refinancing, I'm convinced that we have only seen the beginning of what reflects an interesting market in our geography, and I look forward to an intense and exciting journey ahead. Together with other stakeholders, such as the industry sector, municipalities, investors, and others in Northern Sweden, we are creating new businesses in the biggest green growth revolution of our time.
With my employees, I'm convinced that we will deliver great long-term shareholder value. This takes us to the end of this presentation. Thank you for listening. We are now ready for questions.
If you would like to ask a question, please dial star followed by one on your telephone keypad now. If you change your mind and would like to withdraw your question, please dial star followed by two. And finally, when you are preparing to ask your question, please ensure that your phone is unmuted locally. As a reminder, star one for any questions now. And our first question today is from the line of Albin Sandberg, from Kepler. Albin, your line is now open. Please proceed.
Yes, hi. Thank you. I had a few questions, and starting off on the financing side, and the comments you are making, Knut, in the CEO statement, saying you're taking actions to safeguard your interest cover ratio. Could you clarify a little bit more, what is that in addition to what you normally do?
Mm-hmm. Thank you, Albin. Let's say that we are in specific times with high, high interest rates, but we still, or still, we have a better operating result than ever. So let's say that we work a lot with our costs. We work every day to lower our costs. That's one thing. We are, of course, looking at disposals of properties, and we have long, long gone negotiations going on. So of course, we are doing that, and, and of course, a lot of other things. But the main thing is that we are very active in working with the ICR margin, of course.
Thank you. And then, obviously, you have refinanced both banks and bonds during Q3. I just wonder, and I guess I'm coming into the next question, and while that may be subject to board and so on, but key question is, when you have refinanced, and you say that maybe on the bank side, you see a little bit lower activity, do you feel that there are any sort of expectations from your creditors to hold back on your dividends or anything like that because of this situation? Or do you feel that you're renegotiating or refinancing basically in the same terms as you did before? Are there any changes, so to speak?
Hi, Albin, it's Rolf here. No, we don't hear anything about future dividend or anything. We feel that it's the same discussions as before. So we are very confident. We have very good relationships, and we have very good discussions with our banks, so we're confident in refinancing the debt that's coming up next year.
Just confirm, your target is to be above 2 x, and then you have covenants at 1.8. Is that still valid?
Yeah.
Great. And then my final question is just on the back of this, and maybe this kind of competing targets for how to use your available funds. On the one hand, as you point out, Knut, high NOI, high rents, I guess rather positive market outlook for Northern Sweden in general, but with the balance sheet you have, do you think you can capitalize good enough on these opportunities, or would you have needed a stronger balance sheet in order to fully take advantage of what you're seeing out in the market?
Well, that's a very good question, and I, I'm convinced that we can do that. But in the same way, we are a little cautious with non-yielding investments, and we are very focused on sort of high-yielding investments. And when we make decisions in new investments for tenants, we prioritize the high yield, of course. And so we are a little more cautious with the low-yielding investments. And yes, I'm convinced that we can do a lot more. But of course, just now, we are a little cautious with buying new properties, for instance. We have to be very careful with the balance sheet, and that's our strongest concern right now.
But in the same way, we have a strong market that we have to sort of work in. So it's double-handed. On one hand, we are very cautious with our balance sheet, and on the other hand, we want, of course, we want to take the opportunity to see and act on all the possibilities we can see. So that's how we do and how we work just now. We are very active.
Okay, thank you very much. That was all for me.
Thank you. As a reminder, if you would like to ask a question, please dial star one on your telephone keypad. Our next question is from the line of Nancy Lev of Van Lanschot Kempen. Nancy, your line is now open. Please go ahead.
Hi, good morning. I unfortunately only joined the call a few minutes ago, so apologies if I ask questions that have already been asked or you've reflected, or you've answered during the presentation. First question is on the like-for-like, which came down slightly to 10%. I know it's only a minor change, but what explains it? And is this the direction going forward, or is it only a temporary setback?
Hi, Rolf here. It's a temporary setback, so we don't see this change going forward. If you look at the occupancy rate, it's improving even in the third quarter on the marginal side, but it's improving.
Okay, thank you. Second question I have on the hedging. I see that you've added additional interest rate hedges for SEK 3 billion. I also was able to spot that some of them have a maturity of seven years. What is the rationale for choosing this long maturity?
To lower the cost of debt, and to secure ICR about 2x .
Yeah, I understand, but I guess you can also do shorter-term ones, like three-year or five-year. So then, are you saying that you chose seven-year just because the swap rate for that period is lower, or?
Yeah.
Okay, thank you. That's it from my side.
Thank you. And as a reminder, if you would like to ask a question, please dial star one on your telephone keypad, and I'll now hand over to Johan for some written questions that have come in.
Thank you. There is one written question, and it regards the statement on proposed dividend, as Rolf mentioned. Regarding cash, coming cash flow and securing cash flow, is that for dividend already decided, that will be paid out in January, or is it for upcoming dividend for next year? And the answer to that question is that we have a dividend policy that we, we as it stands, and we should be able to secure cash flow to pay out dividend in line with the dividend policy. So both, both decided dividends since the last AGM and for upcoming proposals that will be announced at the same time as the Q4 report in February. Thank you.
Great. And it appears we have no further questions in the queue at this time, so I'd like to hand back to Knut Rost for any closing remarks.
Thank you very much for listening and putting questions to us in those times. We are happy to have a good Q3, and of course, we are working like we always do, very active on this market that's maybe Northern Europe's hottest market. I thank you all and wish you a nice weekend. Bye-bye from us.
Ladies and gentlemen, this concludes today's call. You may now disconnect from the line.