Market analysis The Swedish housing market began to decline sharply and may soon be felt in Finland as well.

The Swedish housing market has started to decline sharply in recent months. Will Alex af Heurlin, editor of HS Vision, end if the years-long uptrend end when interest rates rise.

Heat roasts over the Baltic Sea, but there is an ice-cold fan in the Swedish real estate market.

A few picks on the Stockholm Stock Exchange from the real estate sector during the first half of the year: Bonava -60 percent, Cibus -42 percent, JM -55 percent, Peab -42 percent.

Real estate companies larger than a degree have not been spared. The market value of Balder, one of the largest real estate companies in the Nordic region, has shrunk from EUR 11 billion to only about EUR 5 billion during the first half of the year.

Pessimists have been waiting for a long time for the collapse of the Swedish debt-driven housing market, but spending has only accelerated over the past couple of years. Swedish housing prices rose by more than 20 per cent during the corona, ie twice as fast as in Finland.

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During the corona, the Swedish housing market was like a technology sector on the stock exchange. Zero interest rates were believed to continue forever and prices rose. Those who played with a high debt burden and risk-taking were rewarded, which further fueled the rise in prices.

If the same trend continues, house prices in the western neighborhood will fall by a dozen percent over the rest of the year.

Now the expenditure has changed.

Prices for Swedish housing fell by 1.6 per cent in May. That is, in one month, not a year.

The worst downs were measured in the heart of the Swedish real estate market in Stockholm, where house prices fell three per cent from the previous month. Trading volumes have decreased by 20 percent. Few people sell their homes when no buyers can be found.

According to preliminary data, the beginning of June was even darker. Prices in Gothenburg slipped by almost four per cent from the previous month, the analysis company estimates Valueguard.

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If the same trend continues, housing prices in the western neighborhood will fall by a dozen percent by the end of the year.

“The rise in house prices in Sweden has been quite sharp during the pandemic, but also in the longer term,” says Nordea’s economist. Juho Kostianen says.

“The biggest concerns are whether households are over-indebted. Interest rates have risen rapidly in Sweden, and the country’s central bank may raise the key interest rate by a further 1.5 per cent towards the end of the year. It has a significant impact on the position of the indebted. ”

Although the real estate market in Finland has been calm in recent years compared to Sweden, the problems of the neighboring country can also be seen here. Large investors see the Nordic countries as one market area. If the world’s largest real estate funds turn their backs on Stockholm and Gothenburg, it will soon be felt in Helsinki and Turku.

There are other links between the Swedish and Finnish real estate markets. Many real estate companies operate on both sides of the Baltic Sea. For example, Balder, which has fallen sharply on the stock exchange, is the main owner of Finnish Sato.

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When the faucets close, often revealing pulls. Or like an investor legend Warren Buffett has stated, “When the low tide comes, let’s see who swam naked.”

This seems to be the case in Sweden as well.

The real estate company Samhällsbyggnadsbolaget (SBB) has been one of the most aggressive growers in the Swedish real estate market. Investment company Viceroy blame SBB for accounting fraud or even outright fraud.

SBB has denied the allegations. All debt is reflected in the balance sheet, SBB says. In our series, it goes without saying.

Investors are not convinced. SBB’s share price has slipped by 75% in the first half of the year. More than six billion euros of the company’s market capitalization has been lost.

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