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Swedish households less optimistic on housing prices

Swedish households are now a tad less optimistic on housing prices, writes SEB’s Elisabet Kopelman in a research note about the Housing Price Indicator for June.

The share of respondents expecting rising prices declined to 55 per cent (58), while the share expecting falling prices increased to 17 per cent (13), with 21 per cent expecting unchanged prices (24). All regions but one (South East) saw a decline in sentiment. Stockholm respondents remain the most optimistic on house prices, though down from the latest peak in April. Households' repo rate expectations were unchanged at 1.2 per cent in one year's time.

A slight Riksbank relief

The recovery in the housing price indicator in 2013 has been reflected in a slight pick-up in both lending and house prices. As such, signals that households are becoming slightly less optimistic on housing prices should, on the margin, come as a relief for the Riksbank ahead of the July 3 rate decision. However, while the housing price indicator declined in June it remains at levels that historically have signalled rising house prices.

New regulations ease pressure on Riksbank

Swedish authorities including the Riksbank, the Financial Supervisory Authority and the Ministry of Finance remain focused on risks for financial stability from rising household indebtedness. During the past month, the FSA formally decided to raise capital requirements for mortgage lending by introducing a new floor for risk weights on mortgage loans and comments from both the FSA and Finance Minister Anders Borg suggested risk weights could be raised further if necessary.

The FSA is also investigating ways to encourage amortisations on mortgage loans on loan-to-value rates below 75 per cent, by regulations on individual amortisation plans. While the Riksbank will continue to warn households that a further build-up of debt will not be tolerated, recent regulatory initiatives should increase the room for Riksbank to focus more on low inflation.