Swedish households start believing in fall in house prices


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Monday, 08 August 2011
The past months where there were indications that Swedish house prices will start reversing did not really catch up with the mood of the Swedish household.

Indications now is that Swedish households started beginning to believe in falling prices in the housing market in August compared to previous month.

The SEB house prices indicator published on Monday shows this perception. If this is to be believed, then it is the first time since 2009 that the Swedish people started feeling weary about their domestic financial situation.

The indicator, which shows the difference between the percentage of households who believe in rising house prices and the proportion who believe in falling prices, fell to -2 in August, from a +9 from the previous month.

Of those surveyed, 35 percent believed in rising house prices, compared with 42 percent last month, while 37 percent believe in falling house prices, compared with 33 percent the previous month. It is the first time since April 2009 that a majority of households believe in falling house prices.

"Sharp falling share prices in the wake of the European debt crisis, and the uncertainty in the U.S. economy and other countries has further fuelled household more negative view of the Swedish housing market. Moreover households have now realized that, despite sharp increases in interest costs in recent times, they’ll are waiting for further interest rate hikes from the Riksbank in the future, "said SEB 's private economist Gunilla Nystr�m in a statement.

Of the households that have fully or partially floating interest rate on their mortgages and loans 7 percent said they intend to fix their interest rate in the coming quarter, unchanged from last month.

The survey also shows that households believe that the repo rate in a year will 2.79 percent, compared with 2.19 percent the previous month.
The survey was conducted during the period July 27 to August 3.

If the Swedish house prices starts falling, it will create two things if all remains equal – a group that will be happy that they could now afford to buy a house, in a Swedish housing market that has been determined to be over valued. This means the price fall will just be shifting from the artificially market created level to its natural level.

The second issue will mean that those who bought their houses when the house prices was up will see the equity of their house down graded while still paying a very high mortgage rates.  Plus the threat of increased in interest rates, this will not be good for some of those home owners. Should the economic situation leads to job losses – then the chaos in the Swedish house market will just be the start to all falls.
By Team

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