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What has happened? House prices in Sweden have increased by 0.8% on month in August 2023, driven by rising values of detached houses, according to seasonally adjusted data released by state-owned lender SBAB.
Context. The latest data comes after a stabilization this year that has led some forecasters to bet the recession is over and has made households increasingly optimistic about the outlook for the Nordics' largest market. This comes despite the fact that the Riksbank is expected to raise its benchmark rate at least once more this year to 4%.
The Problem. The SBAB Unadjusted House Price Index continues to show home values remain about 12% below the peak reached in April 2022. Together with higher costs, this is having a negative impact on developers as new home construction has come to a near standstill and a record number of potential buyers are walking away from deals with new buildings.
This development is a major factor in the expected economic downturn in Sweden, as the construction sector accounts for about 11% of the country's gross domestic product and about half of the sector's activity is related to housing.
The Perspectives. Despite the recent growth, SBAB expects house prices to resume their decline, reaching a total of 20% from last year's peak.
“However, a continued strong market development could mean that we will have to revise that forecast to pencil in a less severe decline,” the bank’s chief economist, Robert Boije, said in a statement.
Source: Bloomberg
Photo by Catalina Johnson on Unsplash
