Eran Peleg, CIO
Sweden’s Housing Market – A Sign of Something Bigger?
Eran Peleg, CIO January 15, 2018

Prices of many real and financial assets around the world have been going up in recent years. They have been fueled by the zero interest rate, ‘easy money’, economic environment. Housing prices have been no exception. As most people are aware, housing prices in many markets, especially in the larger cities, have become quite pricey.
Sweden’s economy is not subject to much media or research analysis. However, it is worth noting that after several years of price increases, house prices in Sweden have started to go down -- and in a fairly dramatic fashion.
Prices were rising for years in the property market in Sweden, the largest Nordic economy, because of housing shortages and very low interest rates. Now, buyers are taking longer to purchase, increasing the supply to demand ratio and driving owners to lower prices. In addition, new mortgage regulations have been put in place, making the financing process more difficult.
Swedish Property Prices (Nasdaq OMX Valueguard-KTH Housing Index):

Home prices fell 2.9 percent nationwide in November, following a drop of 3.0 percent in October, according to the Nasdaq OMX Valueguard-KTH Housing Index, HOX Sweden. They are now 0.2 percent lower than a year earlier, the first time since May 2012 that prices have dropped on an annual basis. Data from Svensk Maklarstatistik AB shows a similar picture: Nationwide apartment prices fell a monthly 3 percent in November, adding to October’s 1 percent drop. House prices fell 1 percent in the month, after being unchanged in October. Apartment prices in greater Stockholm fell 3 percent in the month and were down 4 percent from a year earlier, the first such decline in almost six years. (Source: Bloomberg)
SEB AB’s housing-price indicator, which measures the difference between those who believe prices will rise and those who expect them to drop, fell to minus 5 in December. It showed that for the first time since February 2012, most Swedes expect prices to fall in the coming year.
To us and to most investors who are not directly exposed to this market, the big question is: Is the rapid cooling of the Swedish housing market an isolated, local event or is it an early sign of a much broader, perhaps global, phenomenon of deflating asset prices?
I wish to thank Joseph Adler for his research support.