Sweden House Prices plummets And On Downward Trend

Sweden is currently experiencing persistent downward trend in the price of properties. The former governor of Sweden’s central bank has issued a warning about the high levels of household debt, predicting a significant decline in the country’s real estate prices.

The economy of Sweden can be said to be experiencing Housing crash.

So What is Housing Crash ?

According to Capital.com, A housing crash is characterised by a sudden drop in the price of homes, usually thanks to a market shock. They are usually preceded by housing bubbles – periods of aggressive growth that prove later to be unsustainable.  

They can come from an exogenous shock, typically when the housing market is intertwined with financial markets, as was the case when a sub-prime mortgage crisis among borrowers affected securitized bonds, forcing a combination of defaults and wider financial contagion which worked to obliterate house prices in 2008 and 2009.

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Increases in interest rates are having a significant impact on property market pricing.

Since their peak in the spring of last year, detached home prices have dropped by 19%, while those for apartments have dropped by 14%.

But Cecilia Hermansson, a Swedish researcher specializing in real estate and finances, claims that the rising costs of food, energy, and petrol also make customers more cautious, causing them to delay home purchases.

What Caused the fall ?

According to Washingtonpost.com, Around the world, housing markets suffered in 2022 as central banks raised interest rates in response to sharp increases in inflation. But the fallout in Sweden was particularly dramatic, in large part because the prevalence of floating-rate mortgages has left households there unusually vulnerable to interest-rate changes. More than 40% of mortgages reset their rates in three months or less, and only 18% are fixed for terms of three years or more.

Prices need to increase for the international economy to start rebounding and the situation to become more stable.

High electricity rates, which make it more expensive to heat single-family houses, contribute to the greater decline in house values than in apartment prices.