(Bloomberg) -- Sweden’s home prices are giving off mixed signals as it remains uncertain how lower borrowing costs will affect a housing market which suffered one of the world’s worst post-pandemic slumps.
In August, apartment prices fell by 0.6% from the previous three-month period, and the average price tag for detached houses edged 0.2% lower, according to data published Friday by Svensk Maklarstatistik, owned by the Swedish Association of Real Estate Agents. The reading contrasts with statistics released earlier this week by state-owned lender SBAB, which reported a 2% increase in the same month, versus July.
As the Swedish Riksbank has started taking its benchmark rate lower, most economists expect a modest recovery of home prices as transaction activity picks up after the summer. Nordea Bank Abp has penciled in a 3.7% annual increase by year-end, which implies a move higher by then.
“Our view is that housing prices should increase largely at the same rate as they have recently, though possibly somewhat faster in the near term, as we believe household optimism and the Riksbank’s higher pace of rate cuts will provide an initial boost,” Susanne Spector, the bank’s head of macro research in Stockholm, said in an interview. “A bit of wavering in August won’t change our forecast, as we believe we will see more steady gains during the fall.”
Still, an unusually large supply could put a lid on price growth. Data from the listing site Hemnet indicates that the number of homes for sale was the highest in at least a decade, even before September, which is typically a peak month for sellers to put their homes on the market.
At the same time, longer-term mortgage rates have declined markedly in recent months, which could also speak against valuations rising as households can already enjoy the benefits of lower borrowing costs. Spector agreed that price increases could be limited by the fact that no major moves are expected on longer-term loans, while she noted that floating-rate mortgages remain popular.
“We don’t forecast a return to zero rates,” she said, “so it is unlikely that housing prices are headed back to the peak levels seen when the Riksbank was buying mortgage bonds and interest rates were at record lows.”
SBAB’s data shows that while housing prices in nominal terms are now 8% lower than at their peak in early 2022, homes have lost more than 20% of their value when adjusted for inflation.
©2024 Bloomberg L.P.
