Home Business Swedish House Price Slide Deepens in Test of Vulnerability

Swedish House Price Slide Deepens in Test of Vulnerability

3 min read
Comments Off on Swedish House Price Slide Deepens in Test of Vulnerability


Article content

(Bloomberg) — Sweden’s housing market distress worsened last month as higher interest rates and concerns over energy costs pushed prices of single-family homes lower.

Article content

The housing slump, which is mirrored in countries from Australia to UK, follows a steep run-up in prices during the pandemic. Mortgage terms that don’t require paying off the loan principal in Sweden have helped fuel that boom which is now reversing fast, making the Nordic nation one of the pacesetters for the global housing downturn.

Article content

Read More: Global Housing Market Pain Has Echoes of a Crash 30 Years Ago

The price of detached houses, which saw steeper gains during the Covid-crisis, dropped by 2% from the previous month in October, according to data from Svensk Maklarstatistik, a realtor organization. The average price of sold apartments was largely unchanged. 

In nominal terms, average apartment prices have dropped by 13% since March. Banks in the Nordic country are expecting the slide to continue as the central bank expects to raise borrowing costs further after delivering unprecedented rate hikes in its battle with inflation, at a three-decade high of 9.7%.

Article content

On Monday, the Nordic region’s largest bank Nordea adjusted its economic forecasts to reflect a steeper decline in home prices than it had previously expected. Nordea now believes prices will drop by 20% from the peak, down from a previous forecast of 15%. That development is already weighing on consumer spending, and leading to a decline in construction.

Read More: Nordea Cuts Sweden GDP Forecast as Home-Price Drop Steepens

“After many years of debt build-up, the resultant vulnerability is now being tested,” Nordea’s analysts, led by chief economist Annika Winsth, said. “There are many and powerful forces at play, where the dramatic change in financial conditions has the strongest negative impact on the economy.” 

The next indication of the Swedish housing markets’ health comes on Nov. 21, when data provider Valueguard publishes its closely watched HOX housing index. That will be two days before monetary policy officials at the Riksbank gather to decide on their next move to curb inflation.    


Source link

Load More Related Articles
Load More By 
Load More In Business
Comments are closed.

Check Also

China’s Jan factory activity contracts at slower pace – Caixin PMI

[ad_1] Breadcrumb Trail Links PMN Business Article content BEIJING — China’s factory activ…