Sweden’s central bank has warned that its moves to curb inflation are likely to lead to a deeper crisis in the country’s housing market, which is already in the midst of one of the world’s worst downturns.
According to the Riksbank’s forecast, house prices “will continue to fall next year”. Officials made the comments after new governor Eric Tedin took office, raising interest rates and announcing a bond sale. “There is a risk that house prices will fall more than is now assumed,” they said.
“This can lead to both increased interest in housing investments, greater consumption, and hence higher inflation,” commented the Riksbank.
The overall decline from peak to trough would be “around 20% at most,” which would return prices to pre-pandemic levels, Bloomberg wrote.
The “day of reckoning” in Sweden has come – house prices are falling sharply
Housing prices in Sweden have risen considerably over the past decade
House prices have risen by up to 30% on average in recent years, compared to the pre-pandemic level as of January 2020, according to Nordea Bank. Now prices are dropping dramatically. “By November, we see house prices in Sweden falling by 13% from the peak in February. This is the biggest decline in the housing market since the economic crisis of the 1990s,” commented Gustav Helgesson, an analyst at Nordea.
The sinking housing market in this Scandinavian country is a warning to the world
Housing markets around the world are cooling, but prices aren’t falling everywhere
The Swedish housing market has become an emblematic example of falling property prices not only in Europe. Central banks around the world continue to raise interest rates to tame inflation. The situation is particularly dire in the Nordic country, with prices now down around 16% from a peak almost a year ago.
