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What will happen to property prices in Sweden this year?

What will happen to property prices in Sweden this year?
There are no clear answers yet, but Handelsbanken believe housing prices are set to fall. Photo: Fredrik Sandberg/TT
When the rest of the Swedish economy starts the long road to recovery, that's when the crisis may hit the housing market.

Swedish banking giant Handelsbanken has outlined exactly by how much it predicts property prices will drop when the coronavirus crisis hits the housing market.

Future scenarios predict that some sectors of the Swedish economy may start their road to recovery later this year, but economists fear that the crisis will then start to make itself known on the property market.

“We expect that activity will be lower than normal and that means unemployment will be higher. If you look at homes, construction and the property market in general we believe that the second half of the year will be challenging,” said Christina Nyman, chief economist at Handelsbanken.

Sweden's housing market and construction industry have so far coped relatively well with the corona-fuelled economic crisis, but early signs show a stagnating market with a slight drop in prices in April.

Figures put together by Valueguard showed that property prices fell -3.4 percent for bostadsrätter (a Swedish type of condominium and the most common form of apartment ownership) and -1.1 percent for houses.

Despite small signs of recovery in early May, Handelsbanken predicts that prices will continue falling.

“We predict a fairly slow recovery from this crisis with high unemployment for several years,” said Nyman.

Handelsbanken predicts that housing prices will fall by around 10 percent in Sweden this year, down from a peak at the start of the year. But if the crisis is drawn out, they could plummet even further. The labour market is a key factor, but also how the economic uncertainty affects people's worries about the future.

“There's a lot of uncertainty, but in a scenario where unemployment rises to close to 15 percent, we believe housing prices would fall by 20 percent,” said Nyman, stressing that prices were relatively high before the crisis.


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