Swedish house prices already reduced by 14 percent: harbinger for the Netherlands?
Swedish house prices have risen sharply for years. There was no lack of cheap financing and – just like in the Netherlands – there was a screeching shortage of homes.
This is how a real housing boom is born. Between 2012 and 2021, a house in the Scandinavian country became average almost 90 percent worth more. Even to be on the safe side, it was still over 70 percent. And so there was talk out loud about a possible real estate bubble.
Tipping point
This spring was the tipping point. Since April, Swedish house prices seem to be in a free fall end up, and lower the price further every month. Prices have already fallen 14 percent from the peak, and economists expect they could eventually fall more than 20 percent. It is something that brokers notice every day, says Swedish broker Emma Holst against Bloomberg. “You don’t sell every home after the first viewing, like you used to.”
The decrease cannot be seen from the Swedish rental policy. The rap has been reaching life in Sweden for quite some time now. And so the Riksbank, Sweden’s central bank, decided to intervene with some hefty rate hikes that were higher than many economists had predicted.
That reported interest has the necessary consequences. Not only does it make taking out a mortgage more expensive, the housing costs of many homeowners have also risen sharply. “In Sweden, many people have taken out a mortgage with a variable interest rate,” says housing market Peter Boelhouwer. “If the interest then rises, you will immediately notice it when you die. It is a very risky system.”
‘Very critical’
In addition, many Swedes have taken out part of their mortgages interest-only. Boelhouwer: “If you do not repay in part, while your subsequent payments are based on the very low interest rate, and then the interest is derived so hard. That is very critical.”
The double blow of more expensive consumer prices and at the same time high monthly costs means that many Swedes keep their purse strings tight. Because the emptiness also increases, expected the Swedish government that the country entered a recession last year.
Harbingers for the Netherlands?
What is now happening to the Swedish real estate market is likely to be a herald for many other European countries, Swedish bank Nordea said earlier this year. What about in the Netherlands? After years of rising house prices, Rabobank expects another year.
For this year, the bank is still counting on an average price increase of almost 14 percent. But next year, house prices in the Netherlands will fall by an average of 3 percent, Rabobank expects.
According to Professor Boelhouwer, this is still a cautious estimate. “I don’t expect an extreme price drop like in Sweden, but a further drop of 5 to 10 percent is possible in the first quarters.”
However much house prices fall here too, it is highly dependent on, for example, the outcome of the war in Ukraine, which has caused an energy crisis and thus higher prices.
But the offer is also very important. How many houses are being built? Will the tightness remain that great? What consequences will the announced regulation of the mid-market rent have, what rents must be paid? If investors no longer earn a return as a result of these new rules, they may soon put more houses up for sale. Which in turn has an effect on house prices.
Boelhouwer: “The certainty is very high due to all these factors. It has never been so difficult to insure properly as it is now.”