Swedish housing construction weakens again after stabilisation

SWEDEN’S housing starts probably reached a new low last month as struggling home builders are continuing to postpone and cancel new projects. 

New home construction has fallen by 68 per cent from a peak in August 2021, with a decline of 4.7 per cent on month in December, an indicator published on Wednesday (Jan 17) by data provider Byggfakta Group showed. Previous months’ outcomes were also revised lower when factoring in new information on project cancellations, suggesting that a stabilisation in activity is reversed. 

“The indicator may have resumed a downward trend following a couple of months with more positive signals,” Tor Borg, head of analysis at Byggfakta, said in a statement. “The reclassification of a number of cancelled projects, which had previously been reported to have started, is also negative for the outlook.”

The development comes as home prices weakened at the end of last year, adding to uncertainty about the Swedish housing market even as it steadied in 2023. While unemployment still remains low, households have seen borrowing costs soar at the same time as consumer goods’ prices have increased faster than wages. 

Byggfakta’s indicator, which is based on data from developers and provides a more timely gauge of construction-sector activity than official data, currently signals an annual pace of about 19,000 housing starts for late 2023 and the first quarter of this year. That rate is set to exacerbate existing shortages as Sweden’s National Board of Housing estimates that an annual production of more than 67,000 homes is needed to keep up with demand.

While homebuilders have been forced to cut prices and bankruptcies have increased rapidly, historically high levels of activity in other parts of the construction sector are still providing support to the industry. Byggfakta’s December data also indicates an uptick in non-housing construction. 

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“The backlog of projects in early stages should be able to justify a continued high pace, but there is a risk that the homebuilding downturn could also dampen other construction activity,” Borg said. BLOOMBERG