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Fast Comment SwedenMarch housing prices slightly up as the trend remains remarkably stable

  1. Housing prices up compared to a year ago, but start to 2019 not particularly strong
  2. Broad-based stabilisation in prices for existing homes, but concerns about new construction have not vanished
  3. Week ahead: plenty of interest in housing market developments (Riksbank, NIER Survey)
Housing prices up compared to a year ago, but start to 2019 not particularly strong
The March HOX index shows housing prices increased by 0.7 percent compared to February. By our estimate, this indicates that seasonally/adjusted monthly growth was 0.2 percent, much in line with the indication previously given by Svensk Mäklarstatistik. Hence the start of the year has not been strong overall, but the housing price trend is fairly stable, in our view. And compared to a year ago, housing prices in March were up 1.4 percent.
Broad-based stabilisation in prices for existing homes, but concerns about new construction have not vanished
The stabilisation in housing prices after the fall toward the end of 2017 has been broad-based judging by regional developments. In some parts of Sweden prices are even on a clearly positive trajectory. But looking at new construction, the trend is instead negative still. Firstly, homes are advertised at gradually lower prices. Secondly, a substantial part of the newly constructed homes are subsequently lowered in price ahead of sale. We assume a roughly stable trend in housing prices for existing homes over the next couple of years. Interest rates will remain low, we forecast, supporting prices. On the other hand we think the cooling economy will eventually lead to somewhat higher unemployment, undermining household incomes on the aggregate level. Read more in our macro forecast report from April 9: "Meagre shelter for the global economy".
Week ahead: Plenty of interest in housing market developments (Riksbank, NIER Survey)
Next week sees several important clues to the housing market puzzle. The Riksbank announces its next monetary policy decision on April 25. We expect an unchanged policy rate and continued signalling of an upcoming hike this autumn. However, following not least lower-than-expected inflation outcomes, we think the new policy rate forecast will show a slightly lower probability of a September hike. Despite that, we stick to September as our main scenario for the supposed hike, but it is uncertain and after September we forecast a 0 percent repo rate all through 2020-21 (see Swedish Rate Wrap published April 12 for full Riksbank preview). Moreover, next week also sees the quarterly edition of the NIER survey, where we will follow the construction sector's year-ahead outlook closely. Can the stable housing price trend start to lift the spirits of firms within the sector?

Stable start to 2019, as housing prices rose 0.2 percent in March, adjusted for seasonal effect 



Prices for both houses and flats up on an annual basis, but start of 2019 less convincing for flats  



Stabilisation in prices after 2017 drop is broad-based (1/2) 



Stabilisation in prices after 2017 drop is broad-based (2/2)  



Supply of housing remains high, according to ads data 



Will next week's NIER survey: will construction firms' year-ahead outlook stabilise or not?





We expect a stable price trend in the market for existing homes, but price reductions are still ongoing in the new construction market 





Disclaimer

Johan Löf

Senior Economist

Sweden

jolo22@handelsbanken.se

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