'Trump effect' could knock Swedish house prices
TT/The Local - [email protected]
Published: 14 Nov, 2016 CET.
Updated: Mon 14 Nov 2016 19:22 CET
The election of Donald Trump could lead to falling house prices in Sweden, according to some experts.
Swedish mortgage rates could soon rise on the back of rising market interest rates following the election of the populist Republican as the United States' next president.
Yields on Swedish ten-year government bonds have doubled in the past week, from 0.25 to 0.52 percent, in line with similar patterns around the world. The cost of bank-to-bank lending has also increased significantly, something that might have a knock-on effect on domestic lending, at least "to a small extent" according to Tor Borg, chief economist at Swedish state bank SBAB.
Claes Hemberg, economist at Avanza, said Swedes' high levels of mortgage debt made them vulnerable to rising interest rates:
"When today's borrowers are putting 20-25 percent of their incomes on mortgage interest, rising rates can quickly ruin what might look at first glance like the most solid of private financial situations."
The changed circumstances follow Trump's pledge to massively increase infrastructure spending, leading many investors to shift investments from government bonds into the shares of companies likely to benefit from Trump's policies.
In Sweden, shares in property companies have fallen in the past week, with the property index in Stockholm falling five percent since Trump's election, despite the market as a whole rising.
It's too early to say whether Sweden's private housing market has fallen, but even prior to Trump's victory the rises of recent years appeared to have reached a plateau. In October, prices of houses and apartments rose by 1 percent, but this was an exception to the recent pattern of stagnation.
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Swedish mortgage rates could soon rise on the back of rising market interest rates following the election of the populist Republican as the United States' next president.
Yields on Swedish ten-year government bonds have doubled in the past week, from 0.25 to 0.52 percent, in line with similar patterns around the world. The cost of bank-to-bank lending has also increased significantly, something that might have a knock-on effect on domestic lending, at least "to a small extent" according to Tor Borg, chief economist at Swedish state bank SBAB.
Claes Hemberg, economist at Avanza, said Swedes' high levels of mortgage debt made them vulnerable to rising interest rates:
"When today's borrowers are putting 20-25 percent of their incomes on mortgage interest, rising rates can quickly ruin what might look at first glance like the most solid of private financial situations."
The changed circumstances follow Trump's pledge to massively increase infrastructure spending, leading many investors to shift investments from government bonds into the shares of companies likely to benefit from Trump's policies.
In Sweden, shares in property companies have fallen in the past week, with the property index in Stockholm falling five percent since Trump's election, despite the market as a whole rising.
It's too early to say whether Sweden's private housing market has fallen, but even prior to Trump's victory the rises of recent years appeared to have reached a plateau. In October, prices of houses and apartments rose by 1 percent, but this was an exception to the recent pattern of stagnation.
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