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The Swedish house market dilemma – prices just keep rising

Wednesday, 14 August 2013
First time buyers in the Swedish house market should likely forget the idea of getting on the housing ladder except their pay rise really well or something happens that will cool the persistent house price rise.

For those who felts that house price could fall somewhat, they would be disappointed as such is not something that will happen within the short and medium term.
swedish apartments
The picture thus of the Swedish house market based on various data that was out Wednesday  is mixed, with a strong data for the rental housing market and falling prices for big houses such as villas. Nevertheless, should the price decline for the condominium market, as observed recently to be long term, it may be good news. The government and the central bank or the Riksbank will not sit idly by if the rally continues.

The latest price statistics provide a mixed picture of the Swedish housing market - record prices for condominiums, but falling prices for villas according to market research firm, Valueguard, which points out that July was usually a weak month for single-family homes.

Market analysts feel that if the trend being observed in the housing market, is a realism, then Finance Minister Anders Borg and Riksbank, which frequently warned of the unsustainable rising prices and increased debt will start becoming curious. But the strong rental housing numbers speak another language.

Valueguard's July figure shows continued rise in prices on the hot housing market, which now has climbed by nearly 10 percent in 12 months.

Valueguard condominium index of Stockholm, Gothenburg and medium-sized cities is now running at record high levels. In central Stockholm an average apartment today cost Skr 3.9 million and a square meters now stand at Skr63,000.

In the shorter term, it is difficult to see what can get the heating housing market to cases.

Low interest on mortgage, strong signals that the worst of the debt crisis in Europe, seem to be getting into history, the Swedish economy reviving and expectations of new tax cuts for households in the autumn budget – all aspect that will spike the market more.
Image / Stocholm City -
University resumption in the Autumn is coming at a time where there is acute shortage of student apartments, This will push up more the prices of small condominiums. Also a number of 1990 Baby boomers are ready to leave home and seek their independence. What will really happen to smaller apartments?

The core question now is how far prices will continue to rise before the government and the Riksbank strikes a brake with either interest rates or some form of credit control. Swedish household debt is now 171 percent of disposable income and its expected to reach 176 percent by the end of 2016 according to the Riksbank, which views both prices and debts as worryingly high.

The situation of the Swedish house prices and household debt is something that has been on the lips of various organisations for some tow to three years now. The IMF, European commission, OECD, various credit rating organisations such as Standard and Poors etc., and various analyst organisation have called on Sweden to do something about the house prices that is persistently rising as well as the household debt the persistent house price rise creates.

It is openly said that the Swedish house prices are over valued compared to other markets. One major issues is that with the debt rising exponentially over earnings, a little burst of the bubble in the sector could ground the Swedish economy in a very messy manner.
by Team

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