Property prices in Sweden are expected to continue falling.
Sweden has long had one of the hottest housing markets in Europe, but prices have fallen and are unlikely to recover for a long time, according to Danske Bank. Economists also warn of a “false dawn” as recent housing data suggests a slight rise in prices.
Danske previously predicted a 20% drop, from peak to trough, in house prices in Sweden. It has since revised that figure to a 25% drop, meaning prices are currently “only halfway to the bottom”, according to Danske Bank’s Nordic Outlook report.
investment related news
Prices are currently down 12% from their peak in February last year, according to bank data.
Danske’s rival bank Nordea stands by its previous forecast of a 20% drop in house prices from peak to trough, but says the risk is greater on the downside than on the upside.
“We are still very concerned about the housing market, and we believe there is still a lot of downward pressure on property prices,” Nordea analyst Gustav Helgesson told CNBC.
A “false dawn” with price increases
House price data released by property statistics firm Svensk Maklarstatistik on Thursday showed house prices in Sweden rose for a second consecutive month in March, not in line with what many believe. economists were waiting.
The data shows house prices rose 1% from February. When adjusted for seasonality, the increase translates to a slight decline of 0.3%, with house prices generally rising slightly at the start of each year.
The figure came as a “little surprise” to Jens Magnusson, chief economist at Swedish bank SEB.
“I expected a lower number [on Thursday]Magnusson told CNBC, describing the positive momentum as “a bit premature.” SEB stands by its forecast of a 20% drop in Swedish house prices, but with downside risk.
We are not off the hook.
Analyst at Nordea Bank
Nordea had also anticipated lower prices in the first months of 2023.
“We are quite surprised by the flat price development at the start of the year in unadjusted numbers…I would call it a false dawn,” Helgesson told CNBC ahead of the release of the latest Svensk house price data. Maklarstatistik. “We are not off the hook.”
The National Institute of Economic Research recently adjusted its forecast for a smaller decline in house prices, now seeing a fall of between 15% and 20% – compared to its previous projection near the upper end of 20 % of this decline range. Although more positive, its outlook remains “really pessimistic” according to Emil Brodin, economist at NIER.
“Our forecast is that the bank will raise rates again and house prices will continue to fall, but not as much as they did in 2000 and the fall,” Brodin told CNBC.
Lower volume of new listings and low transaction levels contributed to higher than expected prices.
Further rate hikes
The Swedish housing market is particularly sensitive to fluctuations in interest rates, as around half of mortgages are financed at variable rates and many people have short-term fixed rates.
Sweden’s central bank began raising its interest rate unexpectedly in April 2022, just three months after the bank signaled that it would not raise rates.
Rates then continued to rise, rising from 0.25% to 0.75% in July, then to 1.75% in September, 2.5% in November and finally to 3% in the latest policy statement .
Nordea anticipates a stabilization of the housing market in the second half of 2023, forecasting further rate hikes until June. It then expects key interest rates to plateau for the rest of the year.
The bank predicts “calm price development” in 2024, when property prices begin to recover but do not see a dramatic return to earlier highs.
THE [Riksbank] probably feels under immense pressure from inflation.
Nordic Outlook report
The SEB expects house prices to begin to recover in the summer or early fall of this year and would be “surprised” if the housing market stabilizes before then.
“We remain slightly pessimistic on the housing market for now,” Magnusson said.
Danske Bank also estimated that the Swedish central bank would reach the end of its bullish cycle by summer, prompting house prices to start stabilizing. But it will take a long time before they fully recover.
“It will likely take a few years before house prices return to the previous trend seen in 2005-2019,” Danske Bank wrote in its report.
The bank does not expect the central bank to lower its key rate until inflation reaches its 2% target, a significant reduction from its current rate of 12%.
“The bank likely feels under immense pressure from inflation that shows no signs of peaking and is actually accelerating,” Danske Bank wrote.
The Riksbank – Sweden’s central bank – declined to comment when contacted by CNBC.
- Terrifying moment the plane door opens in the air as the traveler grabs the emergency exit lever
- B2K Singer Raz B Shown In Disturbing Hospital Rooftop Video
- Ivory Hecker Bio, Age, Height, Family, Husband, Ivory Media LLC
- Ted Lasso season 3 episode 12 release date: when is it coming out?
- Trump leads GOP primary polls in early 2024, while voters have mixed feelings for Biden | Quinnipiac | wayne dupree