Swedish home prices have yet to hit a bottom as one of the world’s most severe housing routs is about to enter its second year.
(Bloomberg) — Swedish home prices have yet to hit a bottom as one of the world’s most severe housing routs is about to enter its second year.
Soaring consumer prices and a string of interest-rate increases have dealt a heavy blow to the Swedish economy, which is particularly sensitive to rising borrowing costs. The country’s households have some of the highest debt burdens among rich nations with mortgage rates fixed at short terms.
That has put Sweden at the forefront of a global slump in property prices, as the market has deteriorated since March last year. In February, price trend that factors in more than one month of data showed a decline of 0.6%, adjusted for seasonal effects, according to state-owned mortgage lender SBAB.
While the drop is smaller than it has been in past months, and apartment prices increased slightly, the state-owned bank remains cautious.
“Even though we have seen the situation brighten somewhat in the past two months, especially for apartments, it is too soon to say that prices won’t drop further,” chief economist Robert Boije said in a statement. “We probably haven’t seen the full impact of the rate increases that the Riksbank has implemented and is expected to announce going forward.”
In its efforts to rein in inflation, the Swedish central bank has taken its benchmark rate to 3% from zero in 10 months, and economists expect another hike next month. In addition to the housing-market turbulence, the moves have contributed to a drop in consumer spending. At the same time, new home construction is grinding to a halt, which is set to lead to an economic contraction this year.
The SBAB HPI index, based on sales reported through its listing site Booli, is one of Sweden’s few remaining publicly available housing-market indicators, following a decision by the country’s competition authority to block Valueguard from publishing its HOX index freely.
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