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PROPERTY

Will Swedish housing prices bottom out in early 2023?

According to three experts interviewed by the TT newswire, the worst of the downturn in the Swedish housing market may now be over. But we still shouldn’t expect any major price increases.

Published: 27 December 2022 16:54 CET
Updated: 8 January 2023 08:25 CET
Will Swedish housing prices bottom out in early 2023?
Detached houses (villor) in Enskede, Stockholm. Photo: Fredrik Sandberg/TT

Jonas Rosén, CEO of the Mäklarsamfundet, the Association of Swedish real estate agents, said that if inflation stays high, and Sweden’s Riksbank is forced to raise rates more rapidly and higher than projected, that could mean further price falls. 

“If inflation does not subside and we see further interest rate increases, we will see a tough 2023,” he told TT.  

But he also argued that there was a chance of an upswing in the market by the end of the year.

“We get new jobs, get divorced and move. We are starting to see a tendency where things can change quite quickly. I don’t think this is a housing market bubble bursting, but more a return to normal levels.”

Sweden’s house prices rose to rapidly in 2021 and the start of 2022, but since July 2022, the cost of housing has been on a steady downward trajectory. House prices in Sweden have contracted 15 percent in real terms from their 2022 peak. 

Hans Flink, sales and business development manager at Swedish brokerage statistics, told TT that Sweden’s housing market was still in a better state than those of many other western countries.

“In Sweden, we have been spared the bubbles a bit as we do not have owner-occupied apartments where you buy and own 10 to 20 apartments that you rent out in good years and then have to sell in worse years. We have high price levels, but if you look at, for example, London, it is still very cheap in Sweden,” he said. 

Flink didn’t think property prices would rise in 2023 but predicted more stability in the year to come. “We are now seeing prices start to level off.”

He warned that if severe unemployment continued in the new year, households could become desperate and sell their homes at any price. 

Erik Holmberg, an analyst at the property site Hemnet disagreed, however. “We can cope with higher unemployment. A higher unemployment rate is also a sign that a higher interest rate has to some extent ‘succeeded’, and we will as a result get a lower interest rate.”

He said that 2021 saw an increased demand for more living space due to the pandemic, but didn’t see such an increase in house prices as to count as a housing bubble.

“It is about changing preferences over a period of time. For it to be a housing bubble, there must be some form of speculation or similar,” he said.

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MONEY

Why is Sweden one of the first countries to lower interest rates?

Sweden, along with Switzerland, is among the first countries to lower interest rates in Europe. Why is this?

Published: 10 May 2024 14:56 CEST
Why is Sweden one of the first countries to lower interest rates?

Sweden joined Switzerland, Czechia and Hungary in the small group of countries to lower their so-called policy rates earlier this week when the country’s central bank lowered the interest rate from 4 percent to 3.75.

There are natural explanations for this, according to financial experts.

“Sweden’s economy is more affected by interest rate hikes,” head economist at Nordea, Torbjörn Isaksson, told TT newswire.

Sweden’s GDP has shrunk four quarters in a row, putting Sweden at the bottom of the table when it comes to growth over the past year. Unemployment and bankruptcies have also gone up more than elsewhere.

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Isaksson believes that that’s the main reason Sweden is lowering its policy rate before other central banks, although he predicts the European central bank is only weeks away from lowering its key interest rate.

Although inflation in Sweden has dropped, the country still has higher inflation than both Denmark and Finland – the main reason for cutting the rate in Sweden is the fact that households here are so much more sensitive to high interest rates.

“A high level of household debt and short term loans has meant that high interest rates have hit harder here than elsewhere,” Isaksson said.

“That’s why there’s a greater need to take our foot off the brakes slightly.”

Having said that, Sweden’s economy still has a strong foundation.. Swedish business remains competitive, salaries are set “responsibly”, and the country has strong state finances, Isaksson said.

“Lowering interest rates while remaining hawkish is the best way to go,” SEB head economist Robert Bergqvist said.

“The central bank is showing that they’re taking this first step, they’re ready to take further steps, but they want to keep expectations low.”

Bergqvist described the Swedish economy as being out in the open sea, exposed to strong waves.

“We have strong state finances which work as an airbag, but I think the central bank is happy it can show that it’s reacting to what’s happening in the Swedish economy,” he said.

“It would almost be professional misconduct to not lower the interest rate based on what’s happening with inflation, so it’s hard for the central bank to avoid doing so.”

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