Swedish housing prices extended one of the world’s worst routs, which could be further fueled by interest-rate hikes that are yet to have their full effect.
(Bloomberg) — Swedish housing prices extended one of the world’s worst routs, which could be further fueled by interest-rate hikes that are yet to have their full effect.
Home prices declined a seasonally adjusted 1% in April, led by a drop in the value of detached houses, according to data by SBAB, published on Monday. That follows a 0.8% decline in March.
The data comes after the country’s central bank last week announced a half-point rate increase to 3.5% and projected a peak rate of 3.65%. While most Swedish mortgage rates are fixed for only three months, it will take some time for the latest Riksbank move to fully hit borrowers. Hence, the state-owned lender expects the rout, which has rivaled those in Canada and Australia, among others, to continue as mortgage costs continue rising.
Read More: Sweden’s House Prices to Fall Further, Central Bank Warns
“We expect prices to continue falling during spring, early summer, especially when the latest Riksbank hike will have fully been transferred into mortgage rates,” SBAB chief economist Robert Boije said in a statement.
The housing market weakness, which has so far led to a 16% average decline in the value of detached houses, according to SBAB, is weighing on the Swedish economy. It also spells trouble for the construction sector, which contributes about 11% of Sweden’s economic output. In the first four months of the year, the number of bankruptcies in the construction industry rose by 29%, according to data published Tuesday by credit reference agency UC.
Read More: Sweden’s Builders Fear Protracted Slump as Housing Falters
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