Housing Prices Expected to Keep Rising Despite Swedish Rate Hike, Danske Bank Economist Says

Prices for tenant-owned apartments across Sweden rose by 1.9 percent in October compared with the previous month, according to figures from Swedish Real Estate Statistics. Compared with last year, prices have increased by 5.8 percent. The largest increase was in central Stockholm, where prices were up 10 percent year on year.

Villa prices nationwide fell slightly in October compared with September, by 0.6 percent. However, they have risen by 4.2 percent over the past 12 months.

But how is the housing market affected by the fact that the Swedish Central Bank has raised the key interest rate and is expected to continue raising it?

Households have accepted that interest rates will rise. Despite this, we have seen them continue to consume, and housing prices have continued to rise since the summer, says Susanne Spector.

“Strong demand”

Credit growth and lending have increased, she says, indicating that households are prepared to take on more debt and pay more for housing.

The rate hike was fully expected by the market and most households. This suggests that housing prices will continue to rise roughly in line with incomes.

Marcus Svanberg, CEO of LF Fastighetsförmedling, says October’s figures show that the housing market is still strong. Tenant-owned apartments in particular have gained momentum, which is reflected in prices.

There is still strong demand, even though many customers knew that the rate hike would come this week and that more hikes are on the cards. So far, it has not dampened demand too much.

"Well prepared"

Svanberg believes that some buyers will certainly do extra calculations before buying a home to make sure they can afford it, but that the housing market will generally continue on its current path.

I don't think you should expect this hike, or another one or two, to have any dramatic effect on housing prices. We do not believe that prices will fall, but quite the opposite. But one or two more increases could dampen demand somewhat.

Susanne Spector says high electricity bills could temporarily dampen the housing market during the winter, but that consumption is expected to continue to increase next year.

Households are reasonably well equipped to face three rate increases, which should actually be seen as a normalization of interest rates, she says.