Swedish housing showing signs of calming, says Riksbank chief

Bloomberg

Sweden’s ailing housing market may be entering a calmer phase after being battered by rising interest rates and soaring costs of living, Riksbank Governor Erik Thedeen said.
“If you look at some of the indicators, the decline may have subsided,” Thedeen said at a residential real estate conference in Stockholm. “Perhaps there are signs of some form of stabilisation on the housing market, but we will have to see how this develops going forward.”
The Swedish krona rallied in the wake of the comments, advancing as much as 0.5% to 11.0017 per euro. After experiencing steep losses, the currency has recovered to become the best performer among Group-of-10 peers so far this year, spurred by signals from Riksbank policymakers that they won’t be deterred from further monetary tightening.
The Swedish market for residential property is in one of the worst routs globally, with 16% of home values wiped out in the past year after higher rates fed into variable mortgages. Most forecasters, including the Riksbank, expect the decline to reach 20% from the peak a year ago.
However, Thedeen said that Sweden is currently not experiencing a housing crash, given the declines so far have happened at a relatively calm pace.
“If it stays on this level it is a fairly manageable decline,” Thedeen said. “It is sometimes described as a crash but you should view it from the perspective that we are now close to the level we were at when the pandemic started.”
Asked about the possibility of calling an extra meeting before a scheduled one in April, Thedeen told reporters after the speech that doing so is not currently on the table, and that “it would take fairly exceptional reasons to call an extra meeting.”
Thedeen said that despite forecasts indicating Sweden’s economy will see the worst development in the European Union this year, “there are many factors of strength,” including “a well-educated work force, a high level of digitalisation, high employment rates, low government debt, and the list goes on.”
“We have an economy that is sensitive to interest rates, and that is a problem here and now. We have warned about that for a long time, and that is part of the reason why we’ll have a worse development in 2023, but I take exception with claims that Sweden is the worst economy in Europe based on that.”