Swedish Housing Market Fights Off Tighter Rules as Rally Resumes

Swedish housing price gains accelerated last month as the red-hot market fought off measures that are forcing homeowners to pay down their mortgages faster.

Apartment prices jumped 3 percent in September, following a 1 percent gain in August and a decline of 1 percent in July, according to Svensk Maeklarstatistik AB. House prices rose 1 percent, after being unchanged in the prior two months, it said in a statement on Friday. Valueguard’s Nasdaq OMX Valueguard-KTH Housing Index continued to rise in September, gaining 0.8 percent, paced by a 1.5 percent increase in apartment prices.

The data suggests that the amortization requirement that was introduced by the financial regulator in June only had a limited impact in cooling the market. Authorities are now watching closely whether more measures are needed, which are deemed urgent by the central bank. The regulator has warned that a next step may be to cap loans in relation to households’ income if debt growth becomes unsustainable.

“We’re now seeing a break from the slowdown we had been seeing for a long time,” Per-Arne Sandegren, head of analysis at Svensk Maeklarstatistik, said by phone on Friday. “It’s an unusually clear change in the trend.”

Households are also getting more optimistic, with consumer confidence rising to the highest in more than a year in September. They also expect the value of their homes to increase.

“That households are experiencing rising wealth at the same time as supply is limited, indicates a continued good housing market,” Cathrine Danin, an analyst at Swedbank AB, said in a note. “In the long term we predict a more stable and calmer price development in the housing market. The amortization requirement, in combination with a continued discussion about further measures such as a loan-to-income cap, increased construction and slowly rising mortgage rates will act as restraining factors.”

Since the amortization requirement had already largely been implemented by the banks, the effect on prices around its formal implementation was largely psychological and that’s now fading, Sandegren said. While sales usually pick up in September and October, after a seasonal summer slowdown, the price increases last month were unusually high, he said.

“While we don’t see any signs of a new slowdown, we don’t expect these high monthly price increases to continue,” Sandegren said.

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