Banks Pile Into Sweden's Housing MarketBy
Swedish housing prices just slumped the most in a decade, but banks are still fighting for a piece of the pie.
Swedbank AB, the country’s biggest mortgage lender, is adding volume in an effort to defend its chunk of the country’s 3.12 trillion-krona ($392 billion) home-loan industry. Meanwhile, competition shows no sign of abating as new entrants join the market and niche players double down.
Together, state-owned mortgage bank SBAB, Danske Bank A/S of Denmark and Lansforsakringar grabbed 40 percent of new mortgage lending in 2017, up from just 15 percent a year earlier. The four biggest Swedish banks -- Nordea Bank AB, Swedbank, SEB AB and Svenska Handelsbanken AB -- had 51 percent, down from 69 percent a year earlier.
Swedbank took 19.8 percent of new mortgage lending, which meant its overall market share fell to about 24 percent at the end of last year from about 25 percent a year earlier. Other lenders, such as SEB and Nordea, also lost market share.
Swedbank Chief Executive Officer Birgitte Bonnesen says her “ambition is definitely to keep our market share.”
Sweden’s property market boom came to an abrupt end late last year after an increase in construction pushed supply too high. That coincided with a decline in household sentiment that had already started to take hold. Prices slumped 7.8 percent in the fourth quarter, the steepest drop since 2008, according to the Nasdaq OMX Valueguard-KTH Housing Index, HOX Sweden.
But despite falling house prices, mortgage growth remains strong. Volumes rose an annual 7.2 percent in December, according to Statistics Sweden.
Bonnesen says there’s still "healthy" demand for housing and home loans in Sweden, though she does acknowledge a mismatch between supply and demand for more expensive apartments. She also says the “current normalization" in the housing market is welcome. “The trend in recent years is not sustainable,” she said.
"The Swedish economy’s solid growth, robust labor market, low interest rate levels and strong household finances provide very good prospects for this adjustment," she said. "At the same time there is still demand for less expensive housing owing to population growth and the urbanization trend.”
That means competition is likely to remain fierce. In a December interview, SBAB CEO Klas Danielsson said he expects his bank to keep taking market share. Much of that success is thanks to lower mortgage prices. But more recently, SBAB has had to raise rates on home loans with fixed contracts of 2-10 years after market rates for longer maturities increased.
It remains to be seen whether other banks will follow.