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Swedish housing price indicator signals rising prices

SEB’s Housing Price Indicator inched higher in April from already elevated levels, to 55 (March 54). 65 per cent of households expect home prices to rise in the coming year.

Thus, the indicator continues to signal a rising trend for home prices ahead, in line with SEB’s forecast of a continued moderate increase in prices in 2014. Indeed, current levels of the Housing Price Indicator have historically been consistent with a much stronger development in home prices than what we are currently witnessing. This is especially true for house prices while apartment prices have been rising at a brisker pace. Looking at recent developments, house prices have been fairly flat in the beginning of the year according to Statistics Sweden data, but rising according to timelier but also more volatile Valuguard data.

Demand for housing continues to be supported by an improving labour market, solid real income growth and expectations of continued low rates. On average, households expect the central bank’s repo rate to be at 0.89 per cent in 12 months' time, almost unchanged from last month. This view on rates is also consistent with the still low interest to fix rates, with only 4 per cent expecting to do so within the coming 3 months (unchanged from last month).

The Housing Price Indicator also suggest that household sentiment has not been negatively affected by for instance the Ukrainian crisis. This suggest that the last few months' fall in the consumer confidence was only temporary and that it is likely to recover in the next NIER survey (published on April 29).