House prices in Sweden are expected to continue falling.
Sweden has long had one of the hottest housing markets in Europe, but prices have fallen and are far from recovering Thanks Bank. Economists are also warning of a “false dawn” as the latest housing data points to a modest rise in prices.
Danske previously forecast a 20% peak to trough decline in Swedish house prices. It has since revised that figure to a 25% plunge, meaning prices are “still only half down” at the moment, according to Danske Bank’s Nordic Outlook report.
related investment news
Prices are currently down 12% from the peak recorded in February last year, according to the bank’s data.
Rival Bank Nordea von Danske is sticking to its earlier forecast of a 20% peak-to-trough fall in house prices, but says the risk on the downside is greater than on the upside.
“We are still very concerned about the housing market and believe house prices are still under a lot of pressure,” Gustav Helgesson, an analyst at Nordea, told CNBC.
A “false dawn” with price increases
House price data released by real estate statistics firm Svensk MaklarStatistics on Thursday showed house prices in Sweden rose for the second straight month in March, falling short of many economists’ expectations.
Data shows that house prices are up 1% compared to February. Seasonally adjusted, the increase corresponds to a slight decrease of 0.3%, with house prices usually rising slightly at the beginning of each year.
The number came as a “little surprise” to Jens Magnusson, chief economist at Swedish bank SEB.
“I was expecting a lower number [on Thursday]’ Magnusson told CNBC, describing the positive momentum as ‘a bit premature’. SEB is sticking to its forecast of a 20% fall in Swedish house prices, but with downside risk.
We’re not from the woods.
Analyst at Nordea Bank
Nordea had also expected a price drop in the first months of 2023.
“We’re quite surprised by the flat price trend earlier in the year in unadjusted numbers… I would call that a false dawn,” Helgesson told CNBC, ahead of the release of the latest Svensk Maklar Statistics house price data. “We’re not over the hill”
The National Institute of Economic Research recently revised its forecast for a flatter decline in house prices and now sees a fall of between 15% and 20% — compared to its previous forecast near the top 20% end of this decline range. Although the outlook is more positive, it is still “really pessimistic” according to Emil Brodin, economist at NIER.
“Our forecast is that the bank will start raising interest rates again and house prices will continue to fall, but not as much as in 2000 and the fall,” Brodin told CNBC.
A lower volume of new listings and low transaction levels contributed to the higher than expected prices.
More rate hikes
The Swedish housing market is particularly sensitive to interest rate movements, as around half of mortgages are variable rate and many people have short-term fixed rates.
Sweden’s central bank unexpectedly started raising rates in April 2022, just three months after the bank signaled it would not hike rates.
Rates then continued to rise, jumping from 0.25% to 0.75% in July, then 1.75% in September, 2.5% in November and finally 3% in the latest policy statement.
Nordea expects the real estate market to stabilize in the second half of 2023 and forecasts further rate hikes until June. A base rate plateau is then expected for the rest of the year.
The bank sees “quiet price action” in 2024, when home prices will start to rise but will not see a dramatic return to previous highs.
The [Riksbank] probably feels under immense inflationary pressures.
Nordic Outlook report
SEB expects property prices to recover sometime this summer or early fall and would be “surprised” if the property market stabilizes by then.
“We remain slightly pessimistic on the housing market for the time being,” said Magnusson.
Danske Bank also estimated that the Swedish central bank will reach the end of its cycle of interest rate hikes by the summer, leading to the beginning of a stabilization in house prices. But it will be a long time before they fully recover.
“It will then probably take a few years for house prices to return to the previous trend observed in 2005-2019,” Danske Bank wrote in its report.
The bank doesn’t expect the central bank to cut interest rates until inflation hits its 2% target — a sharp reduction from its current rate of 12%.
“The bank is likely feeling under immense pressure from inflation, which shows no signs of peaking and is actually accelerating,” wrote Danske Bank.
The Riksbank – Sweden’s central bank – declined to comment when contacted by CNBC.
#Swedens #falling #property #prices #halfway #investors #urged #beware #false #dawn
More From Shayari.Page