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PROPERTY

For sale: New record as flood of apartments hits the market in Sweden

A flood of new homes are being listed as up for sale in Sweden as sellers and buyers eagerly hope for an imminent interest rate cut.

Published: 6 May 2024 06:55 CEST
Updated: 6 May 2024 10:17 CEST
an apartment listed for sale in Sweden
Sweden's central bank is expected to lower the interest rate this month or next. Photo: Janerik Henriksson/TT

A record number of apartments were available on Sweden’s main property listings site last month.

A total of 32,233 apartments were listed for sale on Hemnet in April, 40 percent more than the same month last year and the highest number ever for a single month. A lot of these ads are however for upcoming sales rather than apartments that are already up for public viewings.

“The high supply is an effect of a long period of a sluggish market rather than a risk factor for new price drops. This spring we’ve been seeing both rising prices and more activity. Especially as a result of the fact that we appear to be at peak interest rate and that the first interest cut is drawing near,” writes Hemnet market analyst Erik Holmberg in a comment quoted by Swedish news agency TT.

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The previous record month was October 2023, when a total of 31,985 ads were posted on Hemnet.

The Local has previously reported that Swedish property prices are also on the rise as the market kicks into action.

A major reason behind the flood of apartments for sale is the expectation that Sweden’s central bank, the Riksbank, will soon slash the country’s main interest rate. While this is expected to bump up prices, it is on the other hand also likely to lead to lower mortgage rates.

EXPLAINED:

The Riksbank will announce its next decision on Wednesday.

This is a crucial announcement as the so-called policy rate is the bank’s main monetary policy tool. It decides which rates Swedish banks can deposit in and borrow money from the Riksbank, which in turn affects the banks’ own interest rates on savings, loans and mortgages. 

Sweden’s policy rate is relatively high at the moment, 4.0 percent (the highest since 2008), because of the Riksbank trying to bring down inflation. If bank interest rates are high, it’s expensive to borrow money, which means people spend less and as a result inflation drops.

But now that inflation is on its way down, Riksbank chiefs themselves have said that they think it’s likely that they will cut the policy rate in either May or June, and several economists predict that the cut is going to come sooner rather than later, which would mean this week.

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ECONOMY

Swedish inflation drops below 4 percent for first time in two years

Sweden's consumer price index fell to 3.9 percent in February, reinforcing predictions that the central bank will keep lowering interest rates this year.

Published: 15 May 2024 09:25 CEST
Swedish inflation drops below 4 percent for first time in two years

The yearly inflation rate according to the consumer price index (CPI) was down from 4.1 percent in January, according to number crunchers Statistics Sweden.

Experts had predicted an inflation rate of 4.0 percent, according to Bloomberg.

“The effect of increasing interest rates for household’s mortgages is easing, which can explain the decreasing inflation rate in April,” Statistics Sweden analyst Carl Mårtensson said in a statement.

Inflation measured instead according to the CPIF metric – the consumer price index with interest rate fluctuations taken out of the equation – meanwhile rose slightly from 2.2 to 2.3 percent.

However, that still beats expectations, which had predicted CPIF inflation of 2.4 percent.

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That puts it slightly above the Riksbank’s inflation target of two percent, and experts predicted that Wednesday’s inflation news strengthened the likelihood that the bank will cut interest rates further.

The Riksbank last week slashed Sweden’s so-called policy rate for the first time in eight years.

The policy rate is the central bank’s main monetary policy tool. It decides which rates Swedish banks can deposit in and borrow money from the Riksbank, which in turn affects the banks’ own interest rates on savings, loans and mortgages.

If bank interest rates are high, it’s expensive to borrow money, which means people spend less and as a result inflation drops.

But now that inflation appears to be holding relatively steady around the two percent target, it means that the bank might be able to start lowering the policy rate yet again.

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