Housing prices skyrocket despite coronavirus – POLITICO
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STOCKHOLM – European economies face a new threat from the coronavirus pandemic: house price bubbles.
Traveling northwest of central Stockholm, the million dollar homes were dying out after the well-heeled enclave of Bromma.
But that is about to change.
Last week, two 1930s properties in Södra Ängby, a suburb beyond Bromma, were listed for 1.4 million euros each. In Hässelby, on the north-western outskirts of the city, a house with a lake view was listed at 1.5 million euros.
It is a sign of the times. While these properties have yet to be sold, statistics suggest they may well reach their high values.
Average house prices in Sweden have risen 19% in the past 12 months, according to a recent report by the price tracking company Valueguard. The rise is larger for houses than for apartments – 23% versus 12% – and around well-heeled Bromma, prices are up around 25%, according to locals working in real estate sales.
“I have been working as a real estate agent for 17 years and have never seen prices rise as fast as we have seen in the past year,” said Pär Gunnarsson, who works in the Bromma office of Fastighetsbyrån, a Company Swedish real estate. “It’s extreme.”
The situation in Sweden illustrates a wider trend across Europe that has surprised policymakers.
When the pandemic began, market watchers generally assumed that house prices would remain stable at best and may even decline as the economic downturn worsened, but that is not what happened.
With citizens confined to their homes, unable to spend money on restaurants or travel, many people focused on improving their living space.
This appetite for a larger apartment, or ideally a house, has pushed up average prices in a number of housing markets, especially in parts of central and northern Europe, the data shows.
Swiss bank UBS has Highlighted the cities of Munich, Frankfurt, Paris and Amsterdam are likely to bubble in the real estate market, and Stockholm and London appear to be overvalued.
At the same time, many national central banks have continued to throw more fuel on the fire, keeping interest rates near record highs to help companies survive.
It has also made it less expensive for households to borrow more to fulfill their dreams of buying a home.
The concern now is that, as the economy as a whole recovers, central banks will have to raise interest rates to dampen growth and homebuyers could end up with debt they can’t. refund. If they then restrained spending, it would hurt economic recovery. If they have to sell their new homes, that would reveal a bubble as it bursts.
“I don’t want to use words like worried or not worried, but these developments have been surprising for house prices over the past 12 to 15 months,” said Cecilia Skingsley, deputy central bank governor. Swedish Riksbank. “We hadn’t experienced a pandemic in modern times, so we didn’t know how it would turn out, and now we can see that prices are rising not only in Sweden, but in many similar countries such as France and the United Kingdom. and so on, ”she said.
One of the first banks to postpone the stimulus was the Icelandic central bank, which last week raised its principal interest from 0.25 percentage point to 1 percent.
Other central banks across Europe are noting the rising cost of homes.
In its May Financial Stability Review, the European Central Bank mentionned that while house price growth varied in the 19 countries that use the euro, prices were on the rise.
“House price growth remains strong, but the risks of a price correction remain high,” the ECB said.
Financial supervisory agencies, or FSAs, which in many European countries are responsible for financial stability, are also keeping a close eye on things.
In Sweden, at the start of the pandemic, the FSA allowed mortgage lenders to suspend regular payments they owe on their loans.
This option will be removed on August 31.
“The risks are increasing as we don’t think there is a good reason to keep the relaxed rules”, Erik Thedeen, head of the Swedish FSA Told local media.
In the UK, a tax break introduced on home purchases in July 2020 will be phase from June 30 of this year.
While economists largely believe that with good management by central banks, FSAs and lawmakers, problems in the housing market can be avoided, many are increasingly concerned about the risks for the year. to come up.
“I am a little worried, with the revival of the central bank and the legislators, there is a risk of overheating”, Annika Winsth, chief economist of the big Nordic bank Nordea, Told Swedish daily SVD. “This creates a risk of bubbles in many different segments.”
For now, buyers in Stockholm continue to fight for their dream home, with deals often made before a home is even put on the open market.
In Hässelby, one of the few remaining undeveloped land in the suburb went up for sale last week.
There were only the mossy remains of a wooden summer cottage resembling a shed from the middle of the last century, but it was still listed at around € 300,000.
Within days he was off the lists, presumably sold.
“There is great interest in every home that comes on the market,” said realtor Gunnarsson. “And as soon as a lot of people are interested in the same thing, the prices go up.”
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