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CNBC: Housing prices in Sweden have started to fall

11-1-2023 |

House prices in Sweden have risen fairly reliably over the last decade. This has been buoyed by ultra-low interest rates in a system where around half of people’s mortgages are financed with variable rates and many of the rest are on short-term fixed rates.

But now property prices are tumbling. And this downturn is not surprising given the “dysfunctional” nature of the market, according to Stefan Ingves, who headed Sweden’s Riksbank from 2006 to 2022.

“I’ve persistently time and time again said that the debt level in the household sector is just way, way too high and there will be a day of reckoning and eventually rates will go up, and now rates have gone up,” Ingves told CNBC’s “Squawk Box Europe” in an exclusive interview.

During the Covid-19 pandemic, house prices across Europe continued to rise, and Sweden was no exception. Demand for property skyrocketed as working from home and a preference for domestic vacations prompted people to upsize their spaces.

On average, house prices were up as much as 30% compared to the pre-pandemic level of January 2020, according to Nordea Bank, as the Riksbank started purchasing mortgage bonds, trying to bring rates down and adding fire to an already hot housing market.

But now prices are falling, dramatically.

“As of November we are seeing prices nationally in Sweden fall 13% from the peak in February. That’s the largest downturn on the housing market since we had a big economic crisis in the nineties,” Gustav Helgesson, an analyst at Nordea, told CNBC.

Sweden isn’t the only European country experiencing a plunging property market post-pandemic, with some economists forecasting a similar downturn of between 20% and 25% in Germany.

A return to pre-pandemic figures

The dip in the market is a correction that puts Swedish property back to its pre-pandemic state, according to some economists.

Source: CNBC