Swedish housing market gets good news as prices may have bottomed

SWEDEN’S third biggest bank turned clearly more optimistic in its outlook for the country’s battered housing market, saying prices have bottomed out.

Sweden – one of the worst-hit residential property markets globally – has now recorded a 12 per cent drop in home values from their peak at the start of 2022, and no further declines are expected, according to Svenska Handelsbanken. That projection contrasts with most other forecasters, who still see a 20 per cent overall decline due to expected interest-rate hikes.

“Borrowing costs are indeed expected to rise a bit more, but are now close to levels we consider stable in the long term,” Helena Bornevall, senior economist at the bank, said in a note to clients on Monday (Aug 21). “We therefore no longer expect any further falls for house prices” even as any price gains will lag behind incomes in the coming years, she said.

With the Riksbank expected to raise its benchmark rate at least one more time this year to 4 per cent, forecasters have so far been cautious in revising their projections higher even as the market has recouped some losses during 2023 and households have turned more optimistic.

The Riksbank still expects housing prices to fall further over the autumn as transaction volumes drop and mortgage rates rise, for a cumulative decline of 15 per cent to 20 per cent from the peak, it said in its latest monetary policy report in June. BLOOMBERG