Falling house prices in Sweden intensified in September amid signs that rising interest rates and concerns about rising energy prices have dampened demand, according to the latest broker data.
The Scandinavian nation with one of the hottest real estate markets in the world during the pandemic is currently facing a double-digit decline, as in other countries such as Australia and Canada. While the market has been cooling since March, when the Riksbank took a historic turn in monetary policy, there is growing concern that a possible jump in electricity prices in the coming winter could exacerbate the downturn.
Numbers. Apartment prices dropped by 6% compared to last year, while house prices, which rose during the pandemic as buyers sought more space to work from home, fell by 3%, according to Svensk Maklarstatistik, which collects data from real estate brokers. The report says that the volume of transactions for September and the entire third quarter "significantly" decreased compared to the corresponding levels of the last two years.
Quote. "Currently, quite a lot of buyers are expecting prices to fall further, so they are refraining from buying," Helena Bornewall, senior economist at Svenska Handelsbanken, said by phone, adding that she does not think the market has completely stopped.
"It's more of a wait-and-see situation, not that you can't afford it or won't get your mortgage application approved," she concluded.
Context. The data show that the annual decline in apartments cost is currently the fastest since August 2018, when the Scandinavian country last experienced a correction in real estate prices. The drop occurred against the backdrop of a one percentage point increase in the key rate by the Riksbank, the largest in almost three decades under the current policy, and a historic increase in electricity prices in the Scandinavian country.
The drop in prices for private homes was more noticeable in Sweden's three largest cities — Stockholm, Malmo, and Gothenburg — by 6-9% compared to last year. Nevertheless, there are preliminary signs that the fall in the capital may weaken, economists at SEB AB write.
Quote. "However, it is interesting to note that the decline in prices in Stockholm is slowing down, which is usually a leading indicator for the rest of the country," SEB said in a statement. "It's too early to talk about a trend reversal, but in any case, this is a trend that needs to be monitored."
Source: Bloomberg
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