Economy in Focus #3 – Downturn on the housing market
In the 3rd edition of Economy in Focus, Intrum’s Senior Economist, Anna Zabrodzka-Averianov, provides insights into the downturn in Europe’s housing market, with a particular focus on the impact of rising interest rates on household debt. Published in February 2023.
Nordic housing markets hit hardest
After a decade of soaring house prices, the Nordics are experiencing the steepest declines due to high household debt and adjustable mortgage rates. Sweden, Denmark, and Finland face the greatest challenges.
Interest rates drive consumer concerns
58% of European consumers are worried about rising interest rates and their effect on household budgets, particularly in markets with high debt and adjustable mortgage rates, making homeownership more difficult.
Supply shortages may drive future price increases
Despite the downturn, a lack of new residential construction in several European countries could lead to future price increases, especially in regions like Sweden and Finland where building permits have sharply declined.
Comment from Intrum's Senior Economist:
"The sharp correction in house prices in the Nordics is a reflection of high debt levels and rising interest rates. However, a squeeze in new housing supply could push prices up again in the mid-term."
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