Swedish housing prices rise for third month, defying rate rise

SWEDEN’S housing market keeps defying rising credit costs with prices rising for a third month in a row, underpinning a brightening outlook after one of the worst routs globally in 2022.

Home prices rose by 0.8 per cent on month in August, led by rising values of detached houses, according to seasonally adjusted data released on Monday (Sep 4) by state-owned lender SBAB.

The latest reading comes after a stabilisation this year that has led some forecasters to bet that the downturn is over, and made households increasingly optimistic on the largest Nordic market’s prospects even as the Riksbank is expected to raise its benchmark rate at least one more time this year to 4 per cent.

SBAB’s non-adjusted housing price index still shows that the value of homes remains about 12 per cent below the peak in April 2022. Together with higher costs, that’s having dire consequences for home builders, as construction of new dwellings has come to a near standstill and record numbers of prospective buyers are walking away from deals to buy new-builds.

That development is a major factor behind an expected economic contraction in Sweden, as the construction sector represents about 11 per cent of the country’s gross domestic product, and about half of activity in the sector is related to housing.

Despite the recent gains, SBAB expects home prices to resume the drop, reaching a total of 20 per cent from last year’s peak.

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“However, a continued strong market development could mean that we will have to revise that forecast to pencil in a less severe decline,” the bank’s chief economist, Robert Boije said. BLOOMBERG