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This is what Handelsbanken’s chief economist Helena Bornevall writes in an analysis.
“Offers have been piling up and willingness to pay seems to hold even after last year’s sharp price hike. We still don’t see any slowdown in sight and we expect 2021 to be a strong year, ”he writes.
She notes that the pandemic has undone historical ties, where house prices have risen despite rising unemployment and more corporate bankruptcies.
“The economic policy followed and the continued expectations of low interest rates have helped to stabilize the housing market. But it’s hard to explain the sharp rise in house prices just from this, ”he writes.
A major driving force appears to have been the shift in preferences, where more people have reviewed their housing situation during the pandemic, leading to increased demand for housing, as well as vacation homes and renovations. More have wanted to move to bigger ones, but those who already live large have not wanted to sell.
“What we see is, therefore, an imbalance between the demand and the available supply, especially for the larger houses”, writes Helena Bornevall and points out that it is not only for the villas where the demand has increased, but also for the apartments bigger.
He claims that this is not just a Swedish phenomenon either. House prices have risen similarly during the pandemic in a large number of countries, despite large differences in the reduction of monetary policy rates.
So far, no slowdown is in sight either. Strong price developments are expected to continue into the spring, with hot bids and home sales, especially villas. In addition, there are signs of stabilization in the labor market and continued low interest rates.
“Our assessment is that house prices will increase 5 to 10 percent this year compared to prices at the beginning of the year,” writes Helena Bornevall.
However, the slowdown will come eventually. Handelsbanken hopes that more people will want to sell larger villas and apartments once the pandemic subsides, which will help curb price increases.
“The increase in teleworking can contribute to a certain increase in the demand for more living space also in the long term. And a slight shift in preferences towards a larger area. But our assessment is that the situation will remain the main focus, “writes Helena Bornevall.
At the same time, optimism in the housing market is expected to take over in the second half of the year, as the stimulus outlook fades and the economy moves from a strong rebound to a more normal recovery. After the summer, moreover, by all accounts, the temporary exemption from the repayment requirements will be removed, even if Handelsbanken does not expect any major drama from her. Later on, even greater challenges can be envisioned if inflation and interest rates rise.
“Beyond our short-term forecast, which runs through 2022, we see in front of us that inflation will be higher than it is today and that interest costs will eventually rise from today’s exceptionally low levels.” Given the high level of indebtedness and households more sensitive to interest than ever, it is slowing future increases in house prices, ”writes Helena Bornevall.
