Home Prices Cooling Off in Scandinavia

Danish newspaper Berlingske reports on May 9th that the interest rates on Danish mortgages have increased sharply so far this year. There is no reason to expect them to moderate in the coming months:

On Monday [May 9th] they made another jump, and for the first time since 2013 a 30-year fixed-rate mortgage loan can now cost four percent. Just five months ago the rate on the market-dominant loan was at 1.5 percent, and at the beginning of 2021 it was down all the way to 0.5 percent. 

As interest rates rise, real-estate prices will move in the opposite direction. Berlingske quotes Mr. Christian Heinig, chief economist with Danish mortgage bank Realkredit Danmark, as seeing “a significant risk” for declining home prices in the next year or two. 

In Sweden, business weekly Affärsvärlden predicts falling real-estate prices. The commonly used SEB Home Price Indicator for the month of May shows a major decline in optimism regarding home prices:

The share of households who believe in rising [real estate] prices in the coming year is now at 42%, a drop by 10 percentage points from last month. At the same time, the share of households who believe in falling prices is at 24%, an increase by 11 percentage points from the preceding month.

The shift in expectations comes on the heels of new numbers from Svensk mäklarstatistik, a market analysis firm specializing in the market for private homes. A protracted trend of rising prices has given way to stagnant prices across Sweden, the report explains. 

Norwegian real-estate prices are still rising, but according to Henning Lauridsen, CEO of Eiendom Norge, an organization for real-estate agents, more indicators suggest that the upward trend is coming to an end.