Swedish Housing Market Holds Steady Despite Inflation and Tightening Measures

The Swedish housing market has shown remarkable resilience, with home prices maintaining levels higher than those observed before the onset of the pandemic, despite challenges posed by high inflation and stringent monetary policies enforced by the Riksbank nearly two years ago.

Data from SBAB indicates that while the housing construction sector has experienced a near standstill, home prices have remained approximately 10 percent higher since the emergence of the Covid-19 pandemic. This trend reflects the significant gains in property values witnessed during the pandemic period.

Boije, an economist at SBAB, highlighted the possibility of pent-up demand in the housing market following a prolonged period of low transaction volumes. However, he cautioned that an elevated supply of homes for sale coupled with a reduced number of buyers could hamper any potential market recovery.

Recent statistics from SBAB’s property listings site Booli reveal a modest increase of 1.2 percent in house prices in February. Adjusting for seasonal effects, however, indicates little change, signaling a stabilization following a decline in prices towards the end of 2023. This stabilization coincides with growing optimism about the housing market, driven by expectations of impending interest rate reductions by the Swedish central bank.

Boije emphasized that barring significant unforeseen events, such as a surge in unemployment, the data suggests a total decline in housing prices of approximately 15 percent from spring 2022 to the trough observed in December of the previous year.