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Housing sentiment inches down, remains at high levels

Swedish house price sentiment remains very strong with SEB’s Housing Price Indicator down only slightly in May, for the second month running, to 65. The indicator remains near the record high level of 68, reached in March. 

According to the survey, 73 per cent of Swedish households expect home prices to be higher in 12 months' time while only 8 per cent foresee lower prices. The decline was mainly due to a reversal of last month's spike in the northern regions together with somewhat lower sentiment in the middle of Sweden. All other regions showed an increase in sentiment, with Stockholm up marginally for yet another record high.

No rush to fix rates

The share of households that plan to fix rates in 3 months decreased to 4 per cent, from 7 percent in April, and is almost back to the low levels in the beginning of the year. Hence, there are few signs that low yields are causing households to shift towards a larger share of fixed rates which probably reflects that households do not expect the Riksbank to start hiking rates anytime soon. Swedish households' own repo rate expectations were unchanged from last month though households still expect the repo rate to rise from current -0.25 per cent to 0.28 per cent in a year's time.

Home prices have continued to accelerate with prices according to Valueguard increasing well above 10 per cent year-on-year, led by soaring prices on flats. SEB’ Housing Price Indicator clearly suggests that this trend will continue. Difficulties to rein in lending by regulatory measures are another reason to expect further rising prices. Last month the FSA was forced to cancel plans of forced principal repayment requirements on mortgage loans. A government decision is probably needed before such rules can be implemented which may take some time.