Sweden’s depressed housing starts to worsen shortage of homes

A SHARP slowdown in residential construction in Sweden over the past two years threatens to worsen a housing shortage in the biggest Nordic country.

An indicator of housing starts remained at the lowest level in almost nine years in July, unchanged from the month before, as construction has stalled after a year of falling housing prices, data published on Wednesday (Aug 16) showed.

The dwelling subcomponent of the monthly Byggfakta indicator now signals an annual rate of about 25,000 housing starts. That is less than half of the 63,000 homes that need to be built every year to keep up with demand, according to Sweden’s National Board of Housing.

Last year, Sweden endured one of the worst slumps in housing prices globally as high inflation rates and central bank tightening cut consumers’ spending power and propelled the cost of mortgages. The declines in prices, combined with higher cost of credit and raw materials, have forced many construction companies to cancel or postpone projects.

The indicator has declined more than 50 per cent from its August 2021 peak, posting a continuous drop until plateauing in June and July, Byggfakta said.

“Housing starts have fallen sharply since mid-2021 but are now showing signs of stabilisation at historically low levels,” Tor Borg, head of analysis at Byggfakta, said. “A two-year slump in housing starts means that significantly less homes will be added to the market.”

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A deceleration in construction activity is also set to weigh on Sweden’s economic output as the industry represents about 11 per cent of the gross domestic product and employs almost 350,000 people.