Gloomier Outlook Sets Sweden Single Homes Apart as Rout Persists

The Swedish housing market signals growing contrast between a thawing market for apartments and new lows for single family homes after prices have fallen for almost a full year.

(Bloomberg) — The Swedish housing market signals growing contrast between a thawing market for apartments and new lows for single family homes after prices have fallen for almost a full year.   

Home prices have slumped at least 15% from a peak in early 2022, setting the Nordic nation apart as one of hardest hit by rising interest rates and soaring inflation. The new indicator, published by state-owned lender SBAB and its property listing site Booli, heralds more gloom for detached homes that had outsized gains during the Covid crisis. 

SBAB has collated data on factors such as total supply, the number of bidders for properties and the share of homes that are re-listed at lower prices. Its index for stand-alone residences fell to the lowest level recorded last month, while conditions for apartment sales have improved slightly since a low in July.

Booli’s data shows how it has become increasingly difficult to sell properties that were some of the most sought-after during the pandemic. In January, ads for detached houses stayed on the site for an average of 63 days, which is almost four times longer than a year earlier. 

SBAB still expects the price decline from the peak to reach 20%, according to a forecast published Thursday. It also projects Sweden’s economy to contract by 1%, as consumers cut down on spending and investment in new housing plummets. 

The home-price slump, which is Sweden’s deepest in three decades, has been exacerbated by inflation that continues to accelerate despite a string of rate increases by the country’s central bank. Last week, the Riksbank increased its policy rate to 3%, and said that it is likely to continue hiking in April. 

A weakening of the Swedish krona has increased pressure on new governor Erik Thedeen and his deputies to keep the benchmark rate higher than that of the European Central Bank. Even so, SBAB chief economist Robert Boije said the policy makers should assign higher importance to the real economy when charting a path for monetary policy.

“Of course, it is a difficult balancing act as inflation continues to be high,” Boije said in a statement. “However, there’s a lot that indicates that the Riksbank will need to prioritize the worsening development of the real economy more, and put less emphasis on the ECB’s decisions.”  

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