Swedish housing prices continue lower as cost surge looms
THE Swedish housing market, already reeling from the effect of rising borrowing costs, is facing further fallout from surging energy costs.
In August, the HOX Sweden housing-price index decreased 0.2 per cent from the previous month, according to Valueguard, which compiles the data. The drop was smaller than in recent months, as prices for apartments rose by 0.6 per cent. House prices, which saw the steepest price gains during the pandemic, dropped by as much.
The reading comes a day after the Swedish central bank announced a record large interest-rate hike that will increase costs for borrowers. In the months ahead, an even bigger headache may be electricity prices, which are expected to rise to unprecedented levels during the winter. That development could weigh on demand for single-family homes.
“Even if the Riksbank takes the rate even higher, for a lot of house owners electricity will be even more costly than mortgage rates,” Marcus Svanberg, chief executive of Lansforsakringar Fastighetsformedling, one of Sweden’s largest real estate agencies, said in a statement. “At the same time, rate increases are continuing and we haven’t seen the peak of neither inflation nor electricity prices.”
August is traditionally a strong month for the Swedish housing market, and on seasonally adjusted terms, prices overall fell by 1.2 per cent, with single-family homes posting a 1.8 per cent drop. The Valueguard report was still somewhat more ambiguous than the last 6 months’ readings, Nordea analyst Gustav Helgesson said in a note to clients. He noted that apartment prices in Stockholm bounced back while prices in Malmo, the country’s third largest city, kept falling.
“We continue to expect large declines throughout this year as variable mortgage rates are set to surge until the beginning of next year,” Helgesson said. “Yesterday’s unexpected rate hike of 100 basis points means that many households with variable mortgage rates are in for an unpleasant surprise in the coming months.”
Nordea expects home prices to decline by about 15 per cent from their peak earlier this year, with Valueguard data putting the decline so far at 8.7 per cent. The Riksbank on Tuesday (Sep 20) forecast a slightly deeper decline than before, of 18 per cent. BLOOMBERG
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