Swedish home prices rise in April, likely to remain stable going forward

Swedish home prices rose in April. Sequentially, home prices rose 0.2 percent and were up 1.3 percent on a year-on-year. The development in Stockholm has been slightly more sluggish and in April apartment prices came in flat. In the last 12 months apartment prices in Stockholm have dropped 0.1 percent sequentially. Nevertheless, the overall development is consistent with the view of stable home prices, noted Nordea Bank in a research report.

The Swedish central bank had surprisingly lowered the rate path by more than expected last month. Since the start of the year, both the U.S. Fed and European Central Bank have taken on a dovish stance and the Riksbank has followed suit. According to Nordea Bank, the Swedish central bank is likely to keep the repo rate at -0.25 percent at least until the end of 2020. The new forecast lowers the risk of falling home prices going forward.

The supply of new homes is at record high levels that continue to put some downside risks to the main scenario. Nevertheless, the number of housing starts is likely to fall going forward, signifying that the supply will fall in the long run, stated Nordea Bank.

The last two years have been challenging for the housing market. The share of price reduced homes peaked at 10.3 percent at the end of last year. The share has come down to 8.7 percent but is still high compared to previous years.

“All in all, we continue to argue for stable home price going forward. Nevertheless, the risk for a price drop has fallen as mortgage rates likely will stay low for long”, added Nordea Bank.