Inflation pressures threaten to upend one of Europe’s hottest housing markets
SWEDISH home prices continued to fall last month as the surging cost of living threatens to upend what has been one of Europe’s hottest housing markets.
In July, the HOX Sweden housing-price index decreased 2.9 per cent from the previous month, according to Valueguard, which compiles the data.
The downturn has raised fears that what currently looks like a correction may accelerate into a crash with more wide-ranging implications. Prices had dropped the most since the financial crisis in June.
The data released Tuesday (Aug 23) also contained encouraging signs, including of a stabilisation in Stockholm, the country’s most populous city. Apartment prices in the capital bottomed in the latter part of June and rose 1.4 per cent in the first 2 weeks of August compared to the entire month of July. It’s too early to say if that’s due to the usual post-summer rebound or an actual break in the trend, Valueguard said.
“The development of the market as activity picks up again after summer will be important,” real-estate agency Erik Olsson said in a comment on the report. “The negative psychology that characterises the market right now hasn’t arisen from bad conditions, but out of fear that things will get worse.”
Households are seeing prices on consumer goods surge at the fastest pace in 3 decades, and the Swedish central bank is responding by making it more expensive to borrow.
The Riksbank is expected to double its policy rate to 1.5 per cent at its meeting next month, just as realtors are looking forward to more transactions giving a clearer picture of where the market is headed. BLOOMBERG
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