Swedish house prices likely to have declined further in October

Swedish house prices are expected to have continued to decline in October after falling in September, noted Nordea Bank in a research report. Significant amount of uncertainty has been sparked due to recent developments in Swedish housing market. Home sales activity has decelerated further and prices have fallen. Supply is comparatively high, particularly for newly built homes, and this is expected to further drive down prices in near term.

Given this background, the HOX/Valueguard on price developments data for the month of October that is to be released next week is likely to attract quite a lot of attention.

“Based on weekly data from Booli Pro, we forecast prices to decline in October. We pencil in -2.0 percent m/m and 3.5 percent y/y for home prices in the whole country”, stated Nordea Bank.

The decline is likely to be more pronounced for apartment prices in the larger cities. Apartment prices in Stockholm are expected to have dropped 3 percent sequentially and 2.5 percent year-on-year. This would be the biggest monthly decline since October 2008 and the first annual fall since February 2012.

The current anxiety on the market might result in additional declines in November, which might feed further hesitations among potential home buyers. The steep upturn in construction adds to the risks. But the high level of housing investment is a necessary condition for major price correction. It would probably take a change in households’ housing costs to affect home prices fundamentally.

“We therefore stick to our forecast of relatively stable home prices longer out. That said, our risk assessment is downward biased”, added Nordea Bank.

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