Cool interest in holiday homes: “Tangible change”

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The price drop in the housing market continued in July, according to additional preliminary figures. On Monday, Danske Bank released its “housing price indicator” which showed that condominium prices in Stockholm municipality fell by 5 percent during the month. On Tuesday morning, SBAB released its and Booli’s price index HPI for July, which confirmed the picture (minus 5.1 percent). This means a fall of as much as 12 percent since the top listing last year, for both apartments and villas in Greater Stockholm. It is faster than what SBAB expected in its early forecasts.”But then we didn’t think that interest rates would rise this quickly,” says Robert Boije. The question is how the numbers should be interpreted. There are many different actors competing to catch up with housing price developments, and they can sometimes show big differences. In general, the banks are usually the first to release the statistics, but then miss certain transactions that have not yet been reported. Therefore, Valueguard’s HOX index, which is released a little later, is somewhat more precise. Swedish Broker Statistics reports a three-month moving average value.“You can trust all three, but you should be aware that they measure slightly different things,” says Robert Boije. With expected rising interest rates, house prices will continue to fall during the autumn, according to several assessors. Robert Boije does not rule out that the drop could be as much as 20 percent from the top. At the same time, he has been one of the economists who claimed that the sharp rise in housing prices of the last two decades does not constitute a housing bubble, but can be explained by rising real wages and falling interest rates. He still stands by that analysis. “We haven’t had a housing bubble in my opinion, but that doesn’t mean that housing prices can’t fall sharply,” he says.Even Nordea takes note that interest rates rose faster than expected and that the fall in prices followed. The bank may therefore have to adjust its forecasts, according to Gustav Helgesson, macro analyst. “What we see are clear downside risks to our forecast, and it was set when we had a lower final interest rate. Now the interest rate situation has been turned up, which means we may have to revise,” he says, but does not want to put a figure on how big the price drop could be. “No, but I have previously used 15 percent as a risk scenario and can state that the probability of that has increased.”So far, the price drop clearly follows the interest rate increase, according to the two experts. But there are factors that could make the case bigger. During the pandemic, housing prices rose for other reasons, such as the desire for more space. “Should there be a big change there, that housing is no longer prioritized as highly, then it could contribute to the price drop alongside interest rates,” says Robert Boije, adding that in such cases it would affect house prices the most. Villa prices have certainly fallen somewhat more than condominiums this year in Greater Stockholm and Stormalmö, according to SBAB’s index, but the picture is not clear-cut. During the financial crisis, the situation was also the other way around, that the prices of condominiums fell more, so it is difficult to predict, says Robert Boije. “On the other hand, the prices of holiday homes, which have been driven up sharply during the pandemic, may fall significantly more if this situation continues, because it can be seen as a type of luxury item.”Those who have been inside in the housing market for many years do not need to be concerned about the drop in prices, but for others the situation can become difficult.”If you have only been in the housing market for a short time, you may now be sitting in a position where you have loans that are as high as the value of the home, and then you have no margin at all. And if you have just moved in, you may soon have a loan that will soon be higher than the value of the home, and it is clear that then it will be difficult to move,” says Robert Boije. Worried about this group?
“If you end up in a divorce or lose your job and have to sell the home at the same time as housing prices have fallen by 20 percent and end up in a situation where the value of the home is lower than the loan, it is clear that it will be difficult for the individual, but it will affect quite a few get. For it to become a real problem for the Swedish housing market and economy, it would probably take unemployment to increase sharply, as we saw during the 90s crisis. It wouldn’t be good, then I would be worried. And of course such a scenario cannot be ruled out.” Gustav Helgesson predicts an eventful autumn on the housing market. “The floating interest rates have not moved much yet, while we have large interest rate increases on the cards. So I think we can expect continued drama and a volatile market,” he says.

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