Rate fears put freeze on Swedish housing market

A wintery chill has swept over Sweden’s previously sizzling real estate market, with prices for both houses and apartments dropping in November, new statistics show.

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Over the last three months, prices for tenant-owned apartments in Sweden have climbed 5 percent, while house prices have gone up 3 percent, according to figures from property market statistics firm Mäklarstatistik.

But the upward trend reversed in November, as prices for both houses and apartments fell by 1 percent for the month as buyers appeared to take economists’ warnings about coming interest rate hikes to heart.

November marks the first month since the start of the year that apartment prices have dropped.

“We’re seeing that the price rises we had during the autumn are starting to level off. Prices however, are headed in different directions in different parts of the country and as usual it’s hard to decipher where we’re heading,” Per Johnler, head of the Fastighetsbyrån estate agent firm, told the TT news agency.

“On the other hand, the market is being driven by a housing shortage and strong demand. At the same time, we have continuing concerns about the economy and everyone knows interest rates are going to rise sooner or later.”

According to figures from Mäklarstatistik, prices for flats in central Stockholm fell in November by 2 percent, while the value of apartments in the suburbs decreased by 3 percent.

Thus, in the span of a month, the average price of an apartment in downtown Stockholm dropped by roughly 1,000 kronor ($141) to roughly 54,000 kronor per square metre.

However, several flats in the upscale Stockholm neighbourhood of Östermalm have sold for double that average price per square metre during the autumn months.

In Gothenburg, prices rose by 1 percent in downtown neighbourhoods, but fell by 7 percent in the greater metropolitan area.

Apartment prices in Malmö, on the other hand, rose by 7 percent downtown and 4 percent in the suburbs.

Prices for houses, meanwhile, rose by 1 percent in both Stockholm and Gothenburg, while dropping by 3 percent in Malmö.

Despite the current cooling in the housing market, the chief economist with Swedbank, Cecilia Hermansson, doesn’t expect housing prices in Sweden to drop precipitously next year.

“We’ve had somewhat more encouraging economic statistics during the autumn, which I think will affect sellers and buyers on the housing market. And there is probably still room for slightly higher prices in certain areas,” she told TT.

“It’s probably too early to say that the upward price trend is over.”

Hermansson thinks that real estate prices will likely swing up and down in 2010.

“Right now developments are quite shaky in a number of markets, which will affect the housing market,” she said.