(Bloomberg) -- Sweden’s housing market could lose a tenth of its after reaching a tipping point this summer, according to S&P Global Ratings.
The property market in the largest Scandinavian economy is “undergoing a transformation amid increased supply and the impact of new amortization requirements,” S&P credit analyst Sean Cotten said in a note on Friday. “We project prices could fall by 7-10 percent from their August peak before stabilizing in 2018.”
Fears that Sweden’s property market is headed for a correction have already triggered currency losses, with the krona losing 2 percent against the euro last week. Central bankers have tried to talk down the concerns, but the bank has also highlighted the risks associated with soaring mortgage debt burdens.
S&P said prices are likely to fall as stricter amortization requirements coincide with an increase in supply. Meanwhile, the big unknown remains how the market reacts once years of extreme stimulus from the central bank are gradually unwound.
At the same time, Sweden’s economy is strong and S&P said its banks were well-padded against lower house prices.
“Sweden’s economy remains strong, with unemployment falling and activity high,” the rating company said. “In addition, the majority of Sweden’s trading partners are showing positive economic momentum, and Sweden’s household savings and corporate balance sheets
are robust. Consequently, we believe the banks we rate can maintain their current capital and earnings positions.”
©2017 Bloomberg L.P.
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