(Bloomberg) -- Swedish property prices deepened their decline in November, offering no respite for home owners as higher interest rates weaken a market that’s already among the worst performing among developed nations this year.

House prices in the Nordic nation have now lost 13% and apartment prices 12%, compared with peaks earlier this year, according to data published on Thursday, which are broadly in line with a rival indicator published last week. That compares with a drop of 10% for home prices in Canada, from their highest levels. 

Several forecasters, including the Riksbank, project 20% declines for the market overall. Peak-to-trough declines of a similar magnitude are also forecast for countries including the US, the UK and New Zealand.

Detached house prices fell 3% in November from a month earlier while prices for apartments declined 1%, according to Thursday’s release by realtor organization Svensk Maklarstatistik.

The November numbers add to concerns that heavily indebted households will tighten purse strings further, and that new housing construction may come to a virtual standstill. That could deepen an economic slump that Sweden is on the verge of entering.

Prices on Sweden’s housing market, among the world’s frothiest in 2021, had been fueled by years of low interest rates and insufficient supply. That was quickly reversed as the Swedish central bank started hiking its key interest rate in April, taking it to 2.5% last month while signaling more to come.  

The pain has been felt by the Nordic country’s commercial property firms too, which previously relied on cheap funding on the now essentially-closed bond market. Among sub-sectors, residential property has been cited as one of the least preferred assets from a credit rating perspective. 

Diminishing Supply

Swedbank AB’s economist Maria Wallin Fredholm now also sees a price decline of 20%, according to a note to clients, having earlier projected a range of 15-20%, with the market likely to bottom out during the first half of next year.

“We believe that housing prices will continue to fall for as long as the uncertainty regarding the future level of mortgage rates remains,” she said. “Factors that suggest that we reach a bottom during the course of 2023 are e.g., that the Riksbank is expected to stop hiking, households’ purchasing power recovers and the supply of new housing will be substantially lower going ahead.” 

Still, the slump could be “much more severe” if borrowing costs rise more than expected and the labor market worsens more than seen now, she said.

In neighboring Norway, the financial watchdog warned banks their losses could balloon under a worst case scenario where home prices may slump as much as 29% by 2025 from last year’s level, while the commercial property valuations risk plunging 47%.

Read More: Norway’s Watchdog Tells Banks to Prepare for Steeper Losses

“During the pandemic years, prices increased sharply, and for apartments, the declines in 2022 have meant prices have approached levels seen before the pandemic,” Per-Arne Sandegren, an analyst at Svensk Maklarstatistik, said in a statement. “Prices for houses are still clearly higher than in the beginning of 2020.” 

The difference between asking prices and transaction prices for houses was negative for the first time since 2012, according to Maklarstatistik. At the same time, supply is declining, a sign that sellers and buyers are beginning to settle more on price, it said. 

While the number of homes for sale has decreased in recent weeks, supply remains far above normal levels, taking into account the approaching holiday period, according to data from listing site Hemnet.

--With assistance from Joel Rinneby and Niclas Rolander.

(Updates with detail on supply in last paragraph, Norway’s watchdog.)

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