Swedish Housing Market in Worst Slump Since the 1990s
Ancient colorful wooden houses in the city of Karlskrona, Sweden
The Swedish housing market, previously one of the hottest in Europe, has been singled out as one of the most at risk of a crash, with the probability hovering around 50 percent, and may offer a glimpse of what may lie ahead for many other developed economies.Sweden’s slump in home prices accelerated in October, as the Nordic country has been ravaged by the most severe housing decline in three decades.Sweden has seen home prices drop by a massive 14 percent from their peak earlier this year. Furthermore, prices have slid for seven straight months, fueled by the rising cost of living, soaring inflation, a worsening energy pinch and consecutive moves by the central bank to increase interest rates. In October, the Swedish housing price index decreased 3 percent from the previous month, the steepest drop since June.The largest declines has been registered in detached houses, which are particularly vulnerable to soaring electricity prices. A recent report by real estate statistics bureau Maklarstatistik indicated that the price drop was twice as high in the southern part of the country, which suffers from a deficit and high tariffs, than in the northern part of the country, which has an abundance of hydroelectric power.Amid soaring prices, the central bank estimated that a family in Stockholm with loans covering half of their home’s value could see its overall expenses rise by a whopping 60 percent from the 2021 level.Falling home prices make it more difficult to sell newly-built apartments, where occupancy sometimes takes place several years later. Experts noted that homes tend to be sold at around the asking price, with bidding wars being rare. As a result, recovery is not in the sight until next spring at the earliest.The bank SBAB even predicted a total decline of 20 percent before the situation begins to reverse.
EconomySweden ‘Heading Towards a Grim Winter’, Warns Finance Minister1 November, 06:02 GMTSweden, which before the current crisis used to be one of Europe’s hottest housing markets and was largely seen as a pacesetter, may provide a glimpse of what may lie ahead for many other developed economies. The slump is also rather unusual in a country where crises tend to be mild short-lived, and many young buyers have never lived through a housing market crash.Nevertheless, earlier this fall, Oxford Economics singled out Sweden as one of the countries most at risk of a housing market crash together with Canada and New Zealand with a probability of slightly over 50 percent. In the US, the probability of a crash was estimated at 35 percent and in the UK around 25 percent.Housing markets are starting to fall across the world, with fewer transactions taking place. In addition to Sweden, peak to trough declines of up to 20 percent have been forecast for numerous countries including the US and the UK.
