November property prices fall 13% in Sweden

In November, Swedish property prices fell, giving no respite for home owners as higher interest rates weaken a market that is already among the worst performing among developed nations this year.

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According to the data released on Thursday, house prices in the Nordic nation have lost 13% and apartment prices have fallen 12%, compared with previous peaks earlier this year, which is in line with a rival indicator published last week. That compares to a drop of 10% for home prices in Canada, from their highest levels.

Some analysts, including the Riksbank, project a decline of 20% for the market overall. There are also predicted peak-to- trough declines of similar magnitude for countries including the US, the UK and New Zealand.

In November, detached house prices fell by 3% from a month earlier in the month, while prices for apartments fell 1%, according to Thursday s release by the realtor Svensk Maklarstatistik.

The November numbers add to concerns that households with heavily indebted households will tighten purse strings further, and that new housing construction may come to a standstill. Sweden is on the verge of entering an economic slump, and that could lead to a deeper decline in the economy.

The prices on Sweden's housing market, among the world's frothiest in 2021, had been fueled by years of low interest rates and insufficient supply. The Swedish central bank hiked its key interest rate in April, raising it to 2.5% last month, signalling more to come.

The pain has been felt by the Nordic country's commercial property firms, which previously relied on cheap funding on the now essentially closed bond market. Residential property is one of the least preferred assets in the credit rating perspective, as one of the least preferred assets in the sub-sectors.

Swedbank AB economist Maria Wallin Fredholm now sees a price decline of 20%, a range of 15 -- 20%, with the market likely to bottom out in the first half of next year, according to a note to clients.

She believes that housing prices will fall for as long as there is uncertainty regarding the future level of mortgage rates. Factors that suggest that we have reached a bottom during the course of 2023 are e.g. The supply of new housing will be significantly reduced going forward, as households purchasing power recovers and the Riksbank will stop hiking. She said that the labor market could get worse if borrowing costs rise more than expected and the labor market worsens than seen now.

Per-Arne Sandegren, analyst at Svensk Maklarstatistik, said in a statement that prices for apartments increased sharply during the pandemic years and that declines in 2022 have resulted in prices approaching levels seen before the pandemic. The prices for houses are still higher than in the beginning of 2020. The realtor said that the difference between asking prices and transaction prices for houses was negative for the first time since 2012. It said that supply is decreasing and sellers and buyers are beginning to settle more on price.

With help from Joel Rinneby and Niclas Rolander.

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