Swedish house index rises despite uncertain real estate market


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Tuesday, 30 August 2011
Swedish house hold purchasing power in connection with real estate purchases of smaller family houses stepped up in the second quarter, compared with the previous quarter, latest data released on Tuesday, Swedbank’s boindex show

Boindex or house index for the country as a whole rose to 114.1points in the second quarter from the revised 110.0 the previous quarter. In the past similar period, the numbers stood at 110.3.
Boindex is 100 when households use 15 percent of earnings before taxes for the mortgage costs. When boindex is more than 100, it means that households have to afford their housing according to the adopted standard.

Swedbank finds that household income margins for house purchase, has increased, but compared to 2009-2010, there is a weak power in buying a house. The reason for the rise however in the perception of house purchases, in the second quarter is primarily due to lower house prices coupled with increased earnings more than offsets the impact of higher mortgage rates.

Household finances have been squeezed by higher mortgage rates, coupled with stock market declines and concerns about the debt crisis and weaker economic environment; this led to a more moderate housing price.

"We anticipate now that the previously expected rise in interest rates is more modest, and it may dampen the fall in house prices ", says Cecilia Hermansson, Swedbank's chief economist, adding that the unemployment rate once again will begin to rise while the stock market falls, risk of house prices to fall is more significantly. Still household debt and the property market are the largest domestic risks for the Swedish economy.

Average rate for single-family homes in the country stood at Skr1.71 million, a decline of Skr115,000 from the first quarter. An average combined mortgage rate rose from 3.8 to 4.1 percent.
The annual earnings before taxes for a household of two adults with at least one in work rose to Skr603,500 before tax.
By Team

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