Sweden: real estate prices drop is outstanding. According to Knight Frank, year-on-year decreases get global
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House and apartment prices in Sweden have already fallen by almost a fifth since the price peak in Q1 2022. And this may not be the end of this deep correction, economists warn. Meanwhile, globally, in real terms, after accounting for inflation, houses have already started to get cheaper year-on-year.
House prices in Sweden have fallen by -17% since the spring peak, according to data from the state-owned mortgage bank SBAB. The launch of cycles of interest rate increases by central banks caused downward trends in real estate prices not only in this Scandinavian country, but they are most visible there.
Swedish houses are getting cheaper in the eyes
The forecast of the economists of the Swedish central bank assumed that as a result of the cycle of rate increases, the prices of Swedish houses and flats could fall by -20%. These assumptions as to the depth of the correction have already been almost fulfilled, and the end of the monetary policy tightening cycle in developed countries is not yet in sight.
Property prices have also been falling for months in markets such as Canada, Australia and New Zealand. However, in no country have they gone down as much as in Sweden. Several factors contribute to this. This is not only about the rising cost of money and credit, but also about the deteriorating condition of the Swedish economy and prospects, and the increasingly worse social climate for living in a country with the capital in Stockholm.
In December 2022, real estate prices in Sweden fell by -2% m/m. In November they fell by -2.2% m/m, and in October by -2.3% m/m. “If we see an increase in unemployment, it will be important that mortgage payments do not increase. If there is a simultaneous increase in the unemployment rate and an increase in the main interest rate, the situation will become difficult, both for borrowers and for the real estate market,” said SBAB chief economist Robert Boije .
Prices of detached houses have fallen by -19% since the spring peak. Housing prices went down by -14%. Experts explain that houses are cheaper than flats because they are more energy-intensive, i.e. they generate higher electricity bills, which is not welcomed by the owners with the current increases in electricity prices.
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Sweden House Price Index
Source: Trading Economics
Global home prices are falling after inflation
What is the situation with house and apartment prices around the globe? According to the Knight Frank Global House Price Index, house prices in 56 countries continue to grow at an annual rate of 8%, although they have fallen from a peak of 10.9% reached in Q1 2022.
However, in real terms, taking inflation into account, house prices are falling by -0.3% y/y. Despite this, in nominal terms, 48 of the 56 countries see price increases on an annual basis. Real estate prices are growing the fastest in Turkey (189% y/y in the third quarter), but to a large extent this growth is driven by very high inflation (the price growth rate after taking into account inflation is 58%).
Real estate markets with the largest drop in prices since the peak in Q1 2022
Source: Knight Frank
Source: Knight Frank
