Sweden’s housing market could be set for 10pc slump, S&P warns
Scandinavian economy ‘undergoing a transformation amid increased supply and the impact of new amortisation requirements’
Sweden’s housing market could lose a tenth of its value after reaching tipping point this summer, according to S&P Global Ratings.
The property market in the largest Scandinavian economy is “undergoing a transformation amid increased supply and the impact of new amortisation requirements”, S&P credit analyst Sean Cotten said in a note.
“We project prices could fall by 7-10 per cent from their August peak before stabilising in 2018.”
Fears that Sweden’s property market is headed for a correction have already triggered currency losses, with the krona losing 2 per cent against the euro last week.
Central bankers have tried to talk down the concerns, but the bank has also highlighted the risks associated with soaring mortgage debt burdens.
S&P said prices are likely to fall as stricter amortisation requirements coincide with an increase in supply. Meanwhile, the big unknown remains how the market reacts once years of extreme stimulus from the central bank are gradually unwound.
At the same time, Sweden’s economy is strong and S&P said its banks were well-padded against lower house prices.
“Sweden’s economy remains strong, with unemployment falling and activity high,” the rating company said. “In addition, most Sweden’s trading partners are showing positive economic momentum, and Sweden’s household savings and corporate balance sheets are robust. Consequently, we believe the banks we rate can maintain their current capital and earnings positions.”