Houses becoming less affordable
James Savage · 29 Nov 2007, 14:49
Published: 29 Nov 2007 14:49 GMT+01:00
The median price of detached houses sold in Sweden fell slightly in the third quarter. Average incomes increased during the same period, but mortgage interest rates also rose. The effects of rising incomes and falling prices was not enough to counterbalance the effect of rising interest rates.
Swedbank's housing index, which measures people's property purchasing power, fell to 109.7 for the country as a whole, compared to 111.5 for the second quarter.
"The reason that house prices have fallen on a national level, despite rising rapidly in many parts of the country, is that a larger number of houses have been bought in areas with low prices, while fewer purchases have been made in areas with high prices," said Swedbank's Cecilia Hermansson.
House purchasing power fell in half of the 48 municipalities looked at by Swedbank, meaning people being forced to cut back on other forms of consumption in order to afford the cost of buying their homes.
Falling house purchasing power will have an effect on house price growth, Hermansson believes.
"The diagrams indicate that it is likely that in one year the level of house price rises will have fallen, and prices could even stabilise," Hermansson told The Local.
"An increasing number of areas are seeing house price records, while mortgage rates continue to rise. Household incomes may be developing strongly, but not strongly enough to compensate for the effect of higher house prices and interest rates," Hermansson said.
How house prices develop will depend partly on interest rates. Hermansson said that the Riksbank's base rate will "rise a bit more," but said that mortgage rates "may rise by a bit more than the base rate would imply, due to the turbulence on the credit markets."
Apartment prices in the major cities were already falling, Hermansson said.
"Apartment prices usually have an effect on house prices, with a bit of a delay," she said.