(Bloomberg) -- Swedish housing prices fell on a seasonally adjusted basis in January, stretching out a drop for the market that’s in the spotlight for enduring some of the biggest declines globally.
The first month of the year is typically a good time to sell homes, but while prices rose in absolute terms, they were down 1.6% adjusted for seasonal effects, according to state-owned mortgage lender SBAB. The data indicates that a downturn that has erased about 15% of home values since the first quarter of last year may still have some way to go.
“It’s probably too soon to count your chickens, as the seasonal trend is still declining,” SBAB chief economist Robert Boije said in a statement. “I believe the Riksbank’s policy-rate decisions during spring and the electricity-price development will determine where we go from here.”
Sweden’s problems are echoed in various markets throughout the world, as central banks that had kept interest rates low for years rapidly changed course in 2022 to rein in inflation. That’s putting households under pressure both from rising consumer prices and higher borrowing costs.
The Riksbank is widely expected to increase its benchmark rate to 3% at a meeting next week, with some economists projecting that the rate may go as high as 3.5% by this summer. That would put further pressure on borrowers, and could exacerbate a slump that is starting to have ripple effects throughout the Nordic region’s largest economy.
Prices of detached houses have borne the brunt of the onslaught in Sweden as the volatile cost of electricity adds another layer of uncertainty for prospective buyers. The data from SBAB, derived from its listing site Booli, showed that house prices fell by 2.1% in January, adjusted for seasonal effects.
The SBAB data have been largely in line with the Valueguard’s HOX index, watched by Sweden’s central bank to gauge the status of the housing market. That indicator most recently gave a peak-to-trough reading of 16% decline in nominal terms, or around 13% adjusted for seasonal variations. Most economists expect declines of 20% before a recovery.
On the bright side, the data seems to confirm a stabilization in the market for Stockholm apartments, with seasonally adjusted prices trending sideways. The capital region is sometimes seen as a bellwether for the nationwide housing market.
“Apartment prices rose, in the three major cities in particular, in January,” Boije said. “I still believe we need to wait for a couple more months to determine whether the situation is actually stabilizing or if the upturn is more about a normal seasonal variation.”
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