The Indicator declined by 39 points, from an elevated 50 in October to only 11. This is the second largest drop in the history of the series (the largest was 10 years ago, in the midst of the financial crisis November 2007, when the indicator lost 47 points).
At current levels, the Indicator confirms a slowdown in the Swedish housing market but does not yet signal outright declines. This is in line with recent trends in home price data; for instance Valueguard which shows a levelling out of prices and even small declines in September.
In total, 43 per cent of all households (down from 66 per cent) still expect Swedish home prices to rise in the coming year. However, a third (32 per cent versus October’s 16 per cent) now expect prices to decline while 18 per cent (13 per cent) see unchanged prices. Repo rate expectations rose slightly to 0.23 per cent (October 0.17 per cent), but from very low levels, while the share of households planning to fix rates on variable rate loans in the coming three months remains fairly high at 7 per cent (8 per cent).
Stockholm worst hit
The drop in sentiment follows several months with heavy media reporting on newly cancelled residential projects in Stockholm and anecdotal evidence of declining selling prices. Not surprisingly, Stockholm showed the largest declines to the lowest level among all regions (-6, meaning households on balance expect lower home prices in the capital in 12 months’ time).
Tighter regulations and an oversupply of expensive apartments in big cities are other contributing factors behind the decline in sentiment. The coming months’ surveys will be very interesting to see whether it is mainly a temporary scare or the start of a more severe deterioration on the housing market. Valueguard releases data for October on Tuesday November 14.