Swedish home prices rise year-on-year in December

Swedish home prices rose 4.7 percent year-on-year in December, showed the HOX/Vaueguard home price index. On a sequential basis, home prices dropped 0.8 percent, as compared with prior month’s rise of 0.3 percent. Stockholm’s apartment prices came in mainly flat sequentially and rose 5.2 percent year-on-year. Taking seasonal effects into account, home prices rose 0.6 percent sequentially. Both apartment and house prices also rose after taking seasonal effects into account.

In the past six months, home prices have picked up growth. Consumers are positive about home prices, possibly because of the decreasing supply and low long-term rates. The one-off rate hike from the Riksbank in December might dent household optimism about the housing market in the short-term but might boost home prices further out if households interpret this as a confirmation that low rates are a permanent state.

The flattening of the rate path implies as much, noted Nordea Bank in a research report. Meanwhile, households are still gloomy about the general economic outlook in Sweden which might pose some downward risks to the forecast of home prices rising in line with household disposable income going forward, said Nordea Bank.

“Rising home prices support domestic demand and brighten outlook for households. The rather swift increase in home prices during the fall will most likely worry the Riksbank and make them, on the margin, more reluctant to cut rates and go back into negative territory again”, added Nordea Bank.