Sweden’s housing prices are only halfway through their projected slump from last year’s peak, according to the gloomiest forecast so far for residential property in the largest Nordic nation.
(Bloomberg) — Sweden’s housing prices are only halfway through their projected slump from last year’s peak, according to the gloomiest forecast so far for residential property in the largest Nordic nation.
Danske Bank A/S now sees home prices falling 25% from the top as the Riksbank is set to significantly extend its monetary tightening, compared with the earlier forecast of a 20% fall, economists Michael Grahn and Therese Persson wrote in a report.
Sweden — among the frontrunners in the global housing cooldown — has seen residential property prices decline about 12% from their peak last spring, on a seasonally adjusted basis. Most forecasters, including the country’s central bank, have so far projected a fall of about 20%, taking prices back to pre-pandemic levels.
Read More: Sweden Home Prices Resume Slide, With More Declines Forecast
“Our view is that housing prices will stabilise over the summer once the Riksbank reaches the end of its hiking cycle, and then develop sideways for some time,” the report said. “It will probably then be a couple of years before housing prices return to the previous trend seen in 2005-2019.”
Sweden’s slump compares with a 15% fall in Canadian housing prices and a 9% decline in Australia’s capital cities where a 10-month slide was halted last month.
In neighboring Denmark and Norway, with the highest household debt levels globally, home prices are expected to also fall further, Danske said. That’s after a decline of about 10% from the peak in Denmark, while prices in Norway are just 1.9% below the top reached in August.
Danske expects Swedish policy makers to deliver a 75 basis-point benchmark rate hike later this month from 3%, followed by a half-point hike in June, as inflation continues to exceed the forecasts of the central bank. The Riksbank has guided for a rate hike of as much as 50 basis point in April, with Governor Erik Thedeen welcoming the drop in home prices as creating a more level playing field.
(Updates with details from third paragraph.)
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