Sweden posts sharp home-price plunge as borrowing costs soar

SWEDEN’S real estate market is suffering.

Home prices in Sweden dropped 11 per cent year on year in the 12 months till September, the sharpest drop in 56 global markets tracked by real estate company Knight Frank.

The Scandinavian country, which has seen prices plunge as higher interest rates hammer a market that surged during the pandemic, was joined by about 20 markets in seeing a decline: Hong Kong, for instance, fell 8.7 per cent in the year till September, while those in Germany, the UK and China slipped 5.8 per cent, 5.3 per cent and 2.7 per cent respectively.

The declines stand in contrast to an overall increase in prices globally. Prices were up 3.5 per cent this past year on average, as more buyers were able to dip into their savings or secure higher wages to manage higher borrowing costs. In the US, prices rose 3.9 per cent from last year, even as mortgage rates surpassed 7 per cent.

Home buyers have been feeling the pinch of interest-rate hikes around the world as central banks have attempted to quell inflation. But while prices in some countries have remained elevated due to a shortage of houses, other nations are seeing prices dip.

Households in Sweden are not only tackling higher borrowing costs but navigating an economic recession as well. Half of all Swedish homeowners have floating mortgage rates, making them highly sensitive to rate hikes. The Nordic country did see a 0.7 per cent uptick in prices last quarter, however, owing to a lack of listings, according to Knight Frank.

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Around the world, people are postponing plans to buy or jettisoning them altogether. Global sales volume is down 15 to 25 per cent from recent peaks, according to Knight Frank, and is expected to remain low next year and the year after.

“Despite the resilience of some markets, only a shift to lower interest rates will lift sales activity,” said Liam Bailey, researcher at Knight Frank.