Swedish single-family homes extended a housing rout in the largest Nordic nation last month, with stubbornly high inflation and growing borrowing costs clouding the outlook.
(Bloomberg) — Swedish single-family homes extended a housing rout in the largest Nordic nation last month, with stubbornly high inflation and growing borrowing costs clouding the outlook.
An underlying trend figure for the residential property market in Sweden — among the worst-hit globally — showed a decline of 0.8% in March, according to data by state-owned mortgage lender SBAB, published on Monday. This compares with February’s 0.6% fall that was also the best showing in 10 months.
The data follows news last month showing the market was taking a break from a year-long price slide that pushed home prices about 15% lower, on a nominal basis. Most forecasters still expect prices to fall further, as the Riksbank is pledging more key rate hikes to cool core inflation that’s rising at its fastest pace in more than 30 years.
Weakness in the housing market spells more problems for the country’s construction industry, which contributes 11% of Sweden’s economic output. The sector saw bankruptcies jump by 14% last month while the percentage of newly started limited companies was the lowest number in 10 years, according to credit reference agency UC.
A slump in housing starts may stretch out for years, Lennart Weiss, commercial director at construction company Veidekke ASA, said on Friday.
Read More: Sweden’s Builders Fear Protracted Slump as Housing Falters
SBAB’s chief economist Robert Boije called the March development “surprisingly strong.” Still, he expects “significantly weaker development going forward if the Riksbank continues to raise the policy rate and inflation continues to remain at high levels.”
House prices, which benefited from a larger surge in demand during the pandemic, declined 1.5% in March, while apartment prices were unchanged, according to the trend indicator. That compares with a 1.4% fall for houses and a gain of 0.1% for apartments the previous month.
Boije said the house price decline are probably still strongly affected by the high power prices even though the outlook for electricity costs “doesn’t look quite as alarming,” while more electricity subsidies are “on the way.”
Apartment prices are now 8.4% lower than their peak last year, while single-family homes have shed 16.3%, SBAB data showed.
Read More: Sweden Wrestles With an Economic Crisis Built at Home
(Updates with details from fourth paragraph.)
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