Swedish Home Prices Stand Still as Rate Peak Is Nearing

Sweden’s housing market remained in a wait-and-see mode last month, largely in line with the outlook of the central bank that’s signaled a peak in borrowing costs is close.

(Bloomberg) — Sweden’s housing market remained in a wait-and-see mode last month, largely in line with the outlook of the central bank that’s signaled a peak in borrowing costs is close.

A stabilization in home prices, helping household spending, has been a rare brighter spot for the Nordic nation’s economy that faces some of the bleakest prospects in the European Union with a potential two-year recession. It could be key for housing investment and construction that are now diving after valuations plunged last year in one of the worst routs globally.

The average prices of Swedish apartments and detached houses were little changed in September, data from Svensk Maklarstatistik, owned by a business organization of real estate brokers, showed on Friday. Compared with the prior year’s levels, flats were 1% more expensive, while house prices shed 6%.

“Seen over three months, prices are virtually unchanged, which is in line with members’ forecast for the third quarter,” Joakim Lusensky, head of communication at the realtor organization, Maklarsamfundet, said in a statement. “What determines the direction forward is the interest-rate decision in November and how supply develops.”

Joining several other forecasters, the Riksbank has gradually rolled back its estimates for a clearly bigger price slump in housing and now projects only a slight dip next quarter for a 13.3% decline from peak to trough. It sees valuations recovering from then on, while the prices would still remain 5.6% below the 2022 highs by mid-2026. 

The policymakers last month kept the door open for another quarter-point rate hike this year after raising it to 4%, and guided for a prolonged period of high borrowing costs. With inflation pressures still deemed too high, the comments from Governor Erik Thedeen and most of his colleagues in the minutes of their meeting suggested a stronger resolve to extend tightening than communicated in the rate outlook.

Read More: Riksbank Board Hints More Hikes for Longer May Be Needed

–With assistance from Joel Rinneby and Niclas Rolander.

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