The Nordic country’s real estate market is among the worst affected globally, says the outlet
Swedish house prices continued to fall in March as stubborn inflation and rising borrowing costs prolong a crisis in the country’s housing market.
House prices in the biggest Nordic economy fell 0.8% last month, data from state-owned mortgage institute SBAB showed on Monday. The decline had slowed to 0.6% in February, but most experts say house prices will continue to fall and may even exceed the 20% forecast.
House prices fell by 15% in nominal terms last year, driven by rising inflation and interest rate hikes by the central bank.
The worst house price decline in three decades in Sweden has contributed to an increase in the number of defaults, especially in the construction industry, which accounts for 11% of the country’s economic output. In March, bankruptcies in the sector rose by 14%, which has dampened investment in new homes.
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The chief economist at SBAB, Robert Boije, called the March slide “surprisingly strong” adding that he expects “significantly weaker development going forward if the Riksbank continues to raise the policy rate and inflation continues to remain at high levels.”
Sweden’s housing market is the most exposed in the EU due to the country’s rising interest rates. Although around 64% of Swedes own their homes, many have mortgages. However, since in most cases they are not long-term mortgages with a fixed rate, there is a high degree of exposure in the sector to rising interest rates, which are now at their highest levels in more than a decade following a series of increases by the Riksbank.
Industry experts say that housing prices are also strongly affected by unusually high electricity prices and warn that the downturn in the Swedish real estate market could last for several years.
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