Swedish home prices end 2023 on a low as economy clouds outlook

SWEDEN’S housing market weakened further in December, undoing gains made earlier in the year as an economic slowdown dampened hopes of a recovery.

Prices of detached houses as well as apartments fell by 1 per cent last month, according to data from Svensk Maklarstatistik, owned by property brokers. The change implies that valuations of single-family homes ended the year slightly lower than a year ago, while apartment prices rose somewhat from the end of 2022, when Sweden experienced one of the worst housing-market routs in the developed world. 

Forecasters are divided on what to expect, as the possibility of lower borrowing costs could support demand, at the same time as a weakening economy with rising unemployment rates may thwart any near-term price recovery.

“There are factors that speak in favour of a turnaround, as well as against,” Oskar Oholm, chief executive at the realtor association, said in a statement. “There is a large pent-up need for moving, and we are likely at the interest rate peak, which helps households make long-term plans.” 

After leaving its benchmark interest rate unchanged at 4 per cent in November, Riksbank officials have signalled that they see little need to tighten further, and economists at most domestic banks expect a string of rate cuts to begin in May or June. At the same time, increasing costs for developers have led to a sharp downturn in housing construction, which should limit supply in the coming years. 

The average price of private homes now stands about 16 per cent lower than at a peak in April 2022, according to a separate index published last week by state-owned lender SBAB. While that means prices in nominal terms remain higher than before the onset of the Covid-19 pandemic, the development is more dramatic when adjusting for inflation. 

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“People who bought an apartment in 2015 or a detached house in 2016 have seen no value increase whatsoever when considering the high inflation rate,” SBAB chief economist Robert Boije said in a statement. “And for those who bought at the peak in spring 2022, the nominal price drop, combined with inflation, has led to a large drop in real-term wealth that will take a long time to recover.” BLOOMBERG