Swedish Housing Survey Suggests Rout May Soon Begin to Ease

(Bloomberg) — Swedish households’ perceptions of home prices are starting to indicate that a bottom for the market may soon begin to emerge, according to a survey by SEB AB.

(Bloomberg) — Swedish households’ perceptions of home prices are starting to indicate that a bottom for the market may soon begin to emerge, according to a survey by SEB AB.

Values in the largest Nordic economy have plunged as much as 17% from a peak in March, among the worst declines globally since central banks began jacking up interest rates in response to soaring inflation rates. In Sweden, the hikes have fed through to households faster than in most other countries, as most mortgages are fixed for a relatively short period.

The latest data on Monday showed that more households now believe that the market has bottomed, with the SEB house price indicator rising to -21 in January from -36 in December. The share of people expecting prices to fall decreased to 49% from 58%, while the share expecting prices to rise increased to 28% from 22%, SEB said.

“One explanation could be that households do not expect things to get much worse ahead as the peak inflation nears and that households expect the decline in home prices to soften,” economists Daniel Bergvall and Marcus Widen wrote in a note.

The SEB survey, based on 1,000 interviews, shows the difference between the proportion of households who believe prices will rise over the next 12 months and those who see prices falling. 

Still, the key indicator for home prices in Sweden is the Valueguard HOX index, watched by the central bank. That index, which tracks the housing market in almost real time, most recently showed a 15% plunge, and compares with forecasts of about 20% peak-to-trough. 

“We continue to have a bleak view on home prices, given continued pressure from high inflation, rising rates, a weakening economy, and the government’s difficulty in providing support for high electricity prices,” Bergvall and Widen wrote. “Thus, even if households are less negative on home prices, we expect the price decline to continue.”

–With assistance from Joel Rinneby and Niclas Rolander.

(Adds peak-to-trough forecasts in sixth paragraph)

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