Housing slump gathers pace in Sweden with buyers losing faith

STOCKHOLM: Sweden’s housing slump deepened last month as the market struggles to absorb a supply glut and households lose confidence.

Nationwide home prices fell 2.9% in November, following a drop of 3% in October, according to the Nasdaq OMX ValueguardKTH Housing Index, HOX Sweden, which was published yesterday. They are now 0.2% lower than a year earlier, the first time since May 2012 that prices have dropped on an annual basis. Another set of data, from Svensk Maklarstatistik AB, also showed a decline.

The housing market in the largest Nordic economy is rapidly cooling after years of price increases that were driven largely by a housing shortage and ultra-low interest rates. But supply is now outstripping demand and stricter mortgage rules as well as growing apprehension among households are driving prices lower, led by a drop for high-end apartments in Stockholm.

The big supply “has resulted in buyers having more to chose from and taking longer before buying,” Hans Flink, head of sales and business development at Maklarstatistik, said in a statement. “The sellers are therefore starting to adjust their prices to the tougher competition, which is pushing prices down somewhat.”

According to Maklarstatistik’s number, nationwide apartment prices fell a monthly 3% in November, adding to October’s 1% drop. House prices fell 1% in the month, after being unchanged in October. Apartment prices in greater Stockholm fell 3% in the month and were down 4 percent from a year earlier, the first such decline in almost six years.

The slump in Stockholm apartment prices is even more dramatic, according to Valueguard. The monthly drop of 4.2% is the steepest since October 2008, while the annual decline of 6.0 percent is the largest since June 2009.

Officials, including the finance minister and the central bank governor, have so far taking a hands off approach, arguing a cooling in prices is natural after the rapid increases over the past years.