Why Lower Interest Rates Are Not Boosting Housing Prices

More interest rate cuts from the Central Bank and an inflation still under control make the autumn look promising on the housing market. But no larger price increases are to be expected – at least not this year.

» Updated: August 19 2024

» Published: August 18 2024

Why Lower Interest Rates Are Not Boosting Housing Prices
Photo: Fredrik Sandberg/TT

The wave of interest rate hikes from the Swedish Central Bank's side lay like a wet blanket over the entire housing market, says Robert Boije, chief economist at SBAB.

But in recent months, activity on the housing market has increased and is expected to continue during the autumn, especially if the Swedish Central Bank delivers a new interest rate cut next week.

It's the key to getting some momentum on the housing market.

Purchasing Power Returns

On Tuesday, the Swedish Central Bank is expected to cut interest rates by 0.25 percentage points. But it's not just a cut that's needed to get the housing market going again. The Swedish Central Bank has previously stated that it believes in two to three cuts before the end of the year. If they open up for even more cuts in connection with next week's announcement, it could provide further reassurance.

It could be a signal value for those who are going to enter the housing market, that it's breathing a little optimism, says Robert Boije.

The Swedish Central Bank's cut in the repo rate in May, the first in over eight years, has had an impact on the housing market, and further cuts should give a clear "wallet effect" with thousands of kronor less in interest costs going forward for someone who, for example, has a three-million-kronor loan with a variable interest rate, believes Américo Fernández, private economist at SEB.

It means that purchasing power, which has been so drained in recent years, is now actually plus, even if it may not feel that way since things have become permanently more expensive.

Real Crisis

He sees rising housing prices ahead, but the real boost may have to wait a bit. Among other things, due to the large supply of homes on the market that first needs to be absorbed.

And with the greatest likelihood, we will also get a more expansive fiscal policy, including tax cuts. But that will be from next year onwards. It will lead to people having more money in their pockets, the economy starting to grow, and it's usually compatible with rising housing prices, says Américo Fernández.

Both see a bright outlook for the housing market ahead. However, there is still a real crisis in housing construction, notes Robert Boije.

It's really the problem child for the housing market. It's very difficult to get a profitable calculation when it comes to building new homes today.

Tags

TTT
By TTThis article has been altered and translated by Sweden Herald

More news

FI Warns Housing Association Fees
1 MIN READ

FI Warns Housing Association Fees May Keep Rising Due to Loan Costs

Volvo Cars Sees 10 Percent
1 MIN READ

Volvo Cars Sees 10 Percent Drop in March Sales, Electric Models Hit Hard

Stockholm Stocks Slide as Dustin
2 MIN READ

Stockholm Stocks Slide as Dustin Shares Drop 22 Percent

Genre image
1 MIN READ

Systemair CEO Roland Kasper Steps Down After a Decade

Dustin Announces 1.25 Billion Kronor
1 MIN READ

Dustin Announces 1.25 Billion Kronor Boost to Strengthen Finances

Folksam Divests Entire Tesla Stake
2 MIN READ

Folksam Divests Entire Tesla Stake Over Labor Dispute

Trump Set to Announce New
2 MIN READ

Trump Set to Announce New Tariffs as Global Markets Brace

Stockholm Stock Exchange Faces Decline
1 MIN READ

Stockholm Stock Exchange Faces Decline as Futures Point Downward

Trump's Tariffs Predicted to Slow
1 MIN READ

Trump's Tariffs Predicted to Slow Global Economy Growth

Construction Sector Sees Modest Growth
1 MIN READ

Construction Sector Sees Modest Growth with Housing and Government Boost

Asian Markets Show Mixed Reactions
1 MIN READ

Asian Markets Show Mixed Reactions Ahead of Trump's Tariff News

Motorhome Registrations Surge 59 Percent
1 MIN READ

Motorhome Registrations Surge 59 Percent in 2025

Wall Street Closes Mostly Up
1 MIN READ

Wall Street Closes Mostly Up After Volatile Day

Swedish Paper Industry Secures Two-Year
1 MIN READ

Swedish Paper Industry Secures Two-Year Wage Agreement

Trump's New Tariffs on Imports
1 MIN READ

Trump's New Tariffs on Imports Set to Take Effect Today

Sweden to Acquire C-390 Transport
1 MIN READ

Sweden to Acquire C-390 Transport Aircraft in Joint Deal with EU Partners

Finland Shuts Down Last Coal
1 MIN READ

Finland Shuts Down Last Coal Plant, Slashing Emissions by 50 Percent

Volvo and Major Automakers Fined
1 MIN READ

Volvo and Major Automakers Fined 458 Million Euros for Cartel Involvement

Ericsson Drops Diversity Language from
2 MIN READ

Ericsson Drops Diversity Language from Annual Report After US Pressure

Saab and H&M Lead Gains
2 MIN READ

Saab and H&M Lead Gains as Stockholm Stocks Rebound

Gunvor Faces 42 Percent Profit
1 MIN READ

Gunvor Faces 42 Percent Profit Drop in 2024 Despite Revenue Boost

Hooters Files for Bankruptcy, Plans
1 MIN READ

Hooters Files for Bankruptcy, Plans to Sell Company-Owned Locations

Eurozone Unemployment Drops to 6.1
1 MIN READ

Eurozone Unemployment Drops to 6.1 Percent in February

Eurozone Inflation Drop Fuels Hopes
2 MIN READ

Eurozone Inflation Drop Fuels Hopes for ECB Rate Cuts

Swedish Central Bank Boosts Dollar
1 MIN READ

Swedish Central Bank Boosts Dollar Holdings in Reserve Shift

Central Bank Deputy Predicts Inflation
1 MIN READ

Central Bank Deputy Predicts Inflation Easing in Sweden

Tesla Faces Significant Decline in
1 MIN READ

Tesla Faces Significant Decline in Swedish Car Registrations

Sweden's New Industrial Deal Sets
3 MIN READ

Sweden's New Industrial Deal Sets Wage Growth for 2025-2027

Snus Delivery Strike Averted as
1 MIN READ

Snus Delivery Strike Averted as Union Reaches Agreement

Swedish Manufacturing Gains Momentum as
2 MIN READ

Swedish Manufacturing Gains Momentum as Eurozone Shows Positive Trends

Positive Outlook for Harvest Season
1 MIN READ

Positive Outlook for Harvest Season Despite Challenges Ahead

Sweden's New Industrial Agreement Brings
2 MIN READ

Sweden's New Industrial Agreement Brings Stability in Uncertain Times

Stockholm Stocks Rebound with Global
2 MIN READ

Stockholm Stocks Rebound with Global Markets as Key Shares Rise

Gold Prices Hit Record High
1 MIN READ

Gold Prices Hit Record High as Tariff Decision Looms

Australian Central Bank Holds Rates
1 MIN READ

Australian Central Bank Holds Rates Steady, Signals Caution on Inflation

Bankruptcies Rise Again with Hotels
1 MIN READ

Bankruptcies Rise Again with Hotels and Restaurants Hit Hardest

Asian Markets Rebound as Investors
1 MIN READ

Asian Markets Rebound as Investors Await Tariff News

Trump's Global Car Tariffs Begin
3 MIN READ

Trump's Global Car Tariffs Begin as Broader Trade Measures Loom

Open AI Secures Record 400
1 MIN READ

Open AI Secures Record 400 Billion Kronor Investment Boost

Swedish Industry Reaches 6.4 Percent
2 MIN READ

Swedish Industry Reaches 6.4 Percent Wage Agreement Over Two Years